NZ SPORTS MERCHANDISING LTD V DSL LOGISTICS LTD HC AK CIV 20 09-404-005548

NZ SPORTS MERCHANDISING LTD V DSL LOGISTICS LTD HC AK CIV 2009-404-005548 19 August 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2009-404-005548UNDER S24c(4) of the Judicature Act 1908 BETWEEN NEW ZEALAND SPORTS MERCHANDISING LIMITED Plaintiff AND DSL LOGISTICS LIMITED Defendant Appearances: J Long and M Heard for Plaintiff M J Fisher for Defendant Judgment: 19 August 2010RESERVED JUDGMENT OF PRIESTLEY J AS TO COSTSThis judgment was delivered by me on 19 August 2010 at 3.15 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar Date:.Counsel/Solicitors: M Heard, Lee Salmon Long, P O Box 2026, Shortland Street, Auckland 1140 Email: michael.heard@lsl.co.nz J Long, Lee Salmon Long, P O Box 2026, Shortland Street, Auckland 1140 Email: julian.long@lsl.co.nz M J Fisher, P O Box 3236, P O Box 3236, Shortland Street, Auckland 1140 Email: mj.fisher@erskinechambers.co.nzIntroduction[1] The plaintiff is entitled to High Court costs. A large measure of agreement has been reached between counsel on the quantum of the plaintiff's costs entitlement. The parties remain apart, however, in three areas, being: a) Disputed costs of $6400; b) Additional disbursements of $130; c) An uplift on scale costs of $6080. [2] No appearances were required, it being agreed that I should resolve the issue in Chambers on the papers. I have considered counsel's helpful memoranda. [3] For some reason there were delays in counsel's submissions reaching me, with a further delay whilst I took sabbatical leave in July 2010. The Court regrets any inconvenience this might have caused the parties.Background[4] My involvement in this matter was a half day hearing on 16 October 2009, at the conclusion of which I delivered a judgment in the defendant's favour, reserving the question of costs. [5] On 1 December 2009 the Court of Appeal allowed the plaintiff's appeal from my judgment. Senior Counsel, who was not engaged in the High Court, appeared for the plaintiff. As is frequently the case, the determinative point raised by the plaintiff on appeal was not raised in the High Court. [6] The defendant then applied for leave to appeal to the Supreme Court. The Supreme Court declined leave on 30 March 2010. The litigation between the parties is thus at an end and the plaintiff is entitled to its High Court costs.Agreed costs and disbursements[7] The parties are agreed that the plaintiff is entitled to the following costs and disbursements. I so order.CostsItem Description 2B Time Allocation Amount ($1600/day)1 Commencement of proceeding 3 $4,800 4.1 Memorandum dated 16 September 2009 0.4 $640 13 Preparation for mentions hearing 0.2 $320 4.17 Appearance at mentions hearing 0.2 $320 7.2 Preparation of issues list and common bundle 2.5 $4,000 8 Preparation for hearing 1 (0.5 day hearing x2) $1,600 9 Appearance at hearing 0.5 $800TOTAL: $12,480DisbursementsDisbursement AmountFiling original document $1,100 Setting down fee $2,600 Copying $87 Process server $67.50 Courier $8.08TOTAL: $3,862.58Disputed costs2 October 2009 amended statement of claim and memorandum[8] On 2 October 2009 the plaintiff filed an amended statement of claim. It incurred a $90 filing fee as a result. It also filed a memorandum.[9] The plaintiff thus claims, in terms of the 2B scale, $2400 costs for the amended statement of claim and $640 for the memorandum. [10] The plaintiff submits that this step was necessary to protect its interests. The defendant had, at best, given an equivocal response to the plaintiff's request that it be accepted the agreement entitled the plaintiff to carry out a stock-take. In that regard the plaintiff's solicitors had written to the defendant's solicitors on 23 September 2009, and again on 1 October, seeking confirmation the defendant would not detain the plaintiff's stock post-termination. The agreement termination date was 20 October 2009. [11] By letter dated 2 October 2009 the defendant's solicitors replied that the stock-take "may" be completed by 20 October. [12] At the hearing before me the defendant gave oral undertakings relating to the stock-take which made the issue moot. [13] Strictly speaking leave was required to file an amended statement of claim, because its filing was after the 18 September 2009 setting down date. In that situation there should have been an application for leave, but no such application was filed. Instead, the plaintiff sought leave through its memorandum. [14] The defendant's position is it should not be liable for costs because the memorandum was not pursuant to any permissible step. Leave was never granted. The defendant also submits that it had "made it plain" through its solicitors that a stock-take would be completed by 20 October 2009. That stance was confirmed in the defendant's submissions at the hearing. [15] Neither party is blameless in this situation. Given what was at stake, and given that the defendant's solicitor had been put on notice of the stock-take date issue, one can understand the plaintiff wanting to expand the relief sought to protection of its stock. The defendant's solicitor's reply was arguably somewhat tardy and less than comprehensive. Nonetheless, formal leave is required to amend pleadings after the setting down date. In the event, although I referred in my oraljudgment to the amended statement of claim, formal leave was neither sought nor given. [16] In that situation, and reflecting the parties' respective arguments, in the exercise of my discretion I allow the plaintiff $1250 for the filing of the amended statement of claim, plus the $90 filing fee disbursement. Costs on the memorandum are disallowed.Preparation costs and appearance costs[17] The plaintiff contends it is entitled to two days by way of preparation costs rather than the one day which the defendant accepts. The difference here is $1600. The plaintiff also contends for one day appearance costs as opposed to one half day, the difference being $800. [18] The plaintiff's argument here rests solely on the basis that by the time the allocated hearing time of one half day had expired (at 1.00pm) I was still delivering my oral judgment. The Court rose at 1.28 pm, 28 minutes into the lunch adjournment period. Had I reserved my judgment, the issue would not have arisen. It is common ground between the parties, and unarguable, that the hearing itself occupied slightly under one half day. Counsel, however, were required to remain in Court as a matter of courtesy until I had concluded delivery of my oral judgment. [19] Against that background, the plaintiff's request for an extra day of preparation fee ($1600) is untenable. The preparation entitlement was based on the half day period the actual hearing occupied. [20] In the exercise of my discretion I am not prepared to allow an extra half day for an appearance. The issue, in terms of the High Court Rules 2008, so far as costs for appearances are concerned on a half day unit basis, is really one of entitlement. In normal circumstances the half day formula should be strictly adhered to. Over- runs of trial estimates do not alter the respective entitlement and liability of parties. But in this case, where the hearing strictly occupied less one half day; when had my oral judgment finished precisely at 1.00pm there would have been no extraentitlement; and when the only impact of finishing my oral judgment was on the lunch break of counsel and the presiding Judge, I see no sensible reason to exercise my discretion in favour of the plaintiff. [21] The claims for an extra day's preparation costs and an extra one half day's appearance costs are thus refused.Costs memorandum on 18 December 2009[22] The plaintiff accepts that awarding costs for a costs memorandum is a matter of discretion. The plaintiff's argument is the memorandum was filed because it had repeatedly sought agreement on costs in the wake of the Court of Appeal's judgment. [23] The Court has to rely on such memoranda determining costs. There should be an economic incentive, submits the plaintiff, to encourage a party liable for costs to agree, and thus costs on such a memorandum should be awarded to give that incentive. The plaintiff sees the December 2009 memorandum as being a reasonable and proper step. [24] The defendant submits that there was no direction from either me or the Court of Appeal directing the filing of costs memoranda. Furthermore, the plaintiff well knew the defendant had sought advice on a leave application to the Supreme Court. It would thus have been prudent for the plaintiff to await the outcome of the leave application. Furthermore, submits the defendant's counsel, the memorandum contained various items which have been incorrectly calculated or should not have been sought at all (a reference to the disputed costs which I am now resolving). [25] Although I understand the plaintiff's argument about economic incentives, there must equally be an economic incentive for parties not to file costs memoranda which contain optimistic claims. Over-arching the December 2009 memorandum was the plaintiff's knowledge that the Court of Appeal's judgment might not necessarily be the final word.[26] For these reasons, and in the exercise of my discretion, I disallow the $640 claim for the December costs memorandum.Costs for sealing judgment[27] Costs of $320 and a $90 filing fee ride on this issue. The claim is essentially anticipatory. Rule 11.1 suggests that sealing a costs judgment is mandatory. The plaintiff is entitled to costs and disbursements for that step. [28] The defendant's submission is that costs have not yet been incurred; that the defendant will meet its liability for costs; and there is thus no need to seal the judgment. [29] As I understand r 11.11(1), a costs judgment must be sealed and the expense incurred. Because the parties have been unable to agree on costs and a judgment of this Court is required, sealing a costs judgment is reasonable. [30] I thus allow the plaintiff's claim of $320 in costs and $40 in disbursements.Costs uplift[31] The plaintiff seeks an uplift of $6080, being half the scale costs claimed ($12,160) for the steps taken after it had dispatched a Calderbank offer. The steps, which would normally justify costs of $12,160, are: a) Filing amended statement of claim; b) Filing memorandum; c) Preparing an agreed bundle ($4000); d) Preparing for hearing; e) Appearance at hearing;f) Sealing costs order [32] It is significant that not all these steps have been resolved in the plaintiff's favour. [33] The basis for the plaintiff's claim is that on 25 September 2009 it made an offer, without prejudice except as to costs, to pay the defendant $50,000 plus interest. That offer was rejected. Doubtless, with the advantage of hindsight, the defendant wishes it had been accepted. [34] The plaintiff's counsel submits the defendant's rejection of the offer was unreasonable. Ultimately one party would have ended up with everything or nothing, as frequently arises in these occasions. The offer was significantly more than what the plaintiff ultimately had to pay. The reasonableness of the defendant's position is not to be assessed by comparing the offer against the defendant's belief, but rather against the defendant's ultimate entitlement. The defendant's argument involved an element of windfall. [35] The defendant submits the plaintiff can only rely on r 14.6(3)(v). Its argument was respectable so far as its interpretation of the contract was concerned. Although the Supreme Court found there had been no substantial miscarriage of justice, it nonetheless mused that the Court of Appeal may possibly have been in error. It was reasonable for the defendant to reject a sum which was less than 20% of its entitlement had its interpretation of the contract succeeded. Counsel also relied on dictum in Worldwide NZ LLV v QPAM1 to the effect that, on the law of averages, half the time a position advocated in solicitors' letters would accord with what a court ultimately decides. Whether or not that dictum applies to a formal Calderbankoffer is problematic. [36] I am not, in the particular circumstances of this case, prepared to grant an uplift of costs in respect of items and costs incurred in the High Court after 25 September 2009. I do not think, at the time the offer was made, that the defendant's rejection of it was unreasonable. An argument which carried the day for the plaintiff1 Worldwide NZ LLV v QPAM [2009] NZCA 226 at 29.in the Court of Appeal was not advanced by the High Court hearing. If the plaintiff's advisors were aware of the argument at that stage, they certainly did not deploy it. Furthermore, for some reason the Supreme Court, in its leave judgment, alluded to the possibility of the Court of Appeal being in error. The contract in question may well have been unfortunately drafted. But the issue was a matter of simple contractual interpretation. I consider the defendant's stance in the High Court was reasonable, and certainly strongly arguable. [37] Because I am of the view that the defendant's rejection of the Calderbankoffer was not unreasonable (despite the subsequent result), I decline the application to uplift costs pursuant to r 14.6(3)(b)(v) and r 14.11(1). [38] The plaintiff presented an alternative argument that it is entitled to additional costs of $1800 because the defendant unreasonably interfered with the plaintiff's stock-take contractual rights. I have already made a partial award to the plaintiff in that regard in respect of the amended statement of claim. I see no reason, given the fact that this issue did not require any time at the High Court hearing, which would have proceeded in any event because of the parties' differing views on contractual interpretation, to award uplifted costs to the plaintiff on that alternative ground.Result[39] The defendant is ordered to pay the costs and disbursements on which the parties have agreed, as set out in [7] of this judgment. [40] The defendant is additionally ordered to pay $1250 costs on the plaintiff's amended statement of claim and $90 in disbursements. [41] The defendant is ordered to pay the costs of sealing this costs judgment ($320) and the $40 filing fee. [42] The plaintiff's applications for uplifted costs, a costs memorandum, and for additional preparation and appearance costs are declined. .Priestley J