PURE NEW ZEALAND FOODS LIMITED V CARTER HOLT HARVEY LIMITED HC WN CIV 2004-485-2747

PURE NEW ZEALAND FOODS LIMITED V CARTER HOLT HARVEY LIMITED HC WN CIV 2004-485- 2747 17 December 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2004-485-2747BETWEEN PURE NEW ZEALAND FOODS LIMITED Plaintiff AND CARTER HOLT HARVEY LIMITED Defendant Counsel: P W Michalik and A A D Wortman for Plaintiff D M Salmon and T J Herbert for Defendant Judgment: 17 December 2008COSTS JUDGMENT OF RONALD YOUNG J[1] These proceedings concern the packaging provided by the defendants to the plaintiffs for the plaintiff's export business. The plaintiffs complained that the packaging was supplied late, of poor quality and as a result it lost an export order of its food products. It sought damages based on a breach of contract, in the alternative negligence and breaches of the Sale of Goods Act relating to quality. Total damages were approximately $400,000. The defendant counterclaimed seeking payment of the cost of printing the cartons at almost $13,000. The plaintiff's claim failed. The defendant's counterclaim succeeded. [2] The defendant seeks costs on an increase basis under R 48C or in the alternative costs on a 2B basis. The plaintiff opposes increase costs but accepts that costs on a 2B basis are appropriate. There is some debate between the parties about what daily rate applied with respect to particular steps in the proceeding. In addition, there is some dispute about particular disbursements claimed.Increase costs[3] The defendant's claim for increased costs is argued on three bases: a) that the plaintiff's claim faced substantial and multiple hurdles so the prospects of success were low; b) the plaintiff's claim failed on every aspect save the return of certain items to the plaintiff which return had been offered in any event; and c) that the plaintiff unreasonably refused to accept two Calderbankoffers made prior to the commencement of the hearing. [4] The defendant also claims that the plaintiff created extra expense by electing to proceed in Wellington when the defendant's registered office was in Auckland. It claims increased expense was also incurred by proceeding in the High Court when the contractual cap on damages meant the District Court was the appropriate jurisdiction. [5] The defendant alleges the plaintiff's quantification of its losses was speculative and unsupported by expert evidence. The defendant says it was required to mount a careful defence because the plaintiff's case attacked the viability of its standard terms of sale. [6] The defendant says that increased costs of $100,000 should be awarded which they say would represent approximately 65% of their actual costs. They calculate costs assessed on a 2B basis as $34,960.00. [7] It is common ground that the onus is on the party seeking an increase costs under R 48C to demonstrate that they are justified: Radfords Limited v Advertising Works New Zealand Limited HC Auckland, CIV 2006-404-325 at 21-22.Prospects of success low and failure of plaintiff's case[8] In particular the defendant claims that the plaintiff's quantification of its claim was inadequate and no proper analysis was undertaken. I accept that the plaintiff's evaluation of its losses derived from the cancellation of their export contract was speculative and implausible. But it does not seem to me that simply having a poor case is sufficient to justify the exceptional step of awarding increased costs. While overall the plaintiff's case was not strong by itself I do not consider it was sufficiently inadequate to justify increased costs by itself.Calderbank offers[9] On 20 July 2007 the defendant made an offer "without prejudice save as to costs" to settle a matter on what they called a "walk away" basis with costs lying where they fell. This was declined by the plaintiff. The plaintiff invited the defendant to make a "substantial" offer. [10] On 16 October 2008 the defendant offered without prejudice save as to costs the sum of $12,969.28 with costs lying where they fell. That was contended by the defendant to be the maximum damages payable, should the plaintiff succeed, given the liability cap in the contract. That offer was rejected and the plaintiff made a counteroffer to settle for a payment of $145,000. [11] A Calderbank offer can have affect through R 48C(3)(b)(v) to trigger an award of increased costs, which are to be calculated as an uplift from the scale award for costs of the entire proceeding. The question is, therefore, was the refusal of the two offers reasonable in the circumstances? [12] I am satisfied that the plaintiff's decision to decline the offer of 20 July 2007 was reasonable in the circumstance. It was simply an offer for the plaintiff to walk away from its case and drop the proceedings: See for example, Hira Bhana & Co Limited v PGG Wrightson Limited [2007] NZCA 342. As to the offer of 16 October 2008 there is some force to the plaintiff submissions that this was rejected because it was made so close to the hearing and substantial legal costs hadalready been incurred. The offer was a very small percentage of the plaintiff's claim. The offer, however, had integrity in the sense that it did relate to the contractual cap on damages. Although the decision to refuse the offer was, with the benefit of hindsight unwise, I am not satisfied it was sufficiently unreasonable to trigger the increased costs provision. [13] Considered overall by a somewhat narrow margin I am not satisfied the defendant has made out the case for increased costs. I refuse that application. I am satisfied that costs on a 2B basis are $33,625.00. [14] As to disbursements the plaintiff submits: a) that the defendant should only be entitled to two thirds of the expert witness fees. I reject that argument. The plaintiff was entitled to the full costs of its experts: See Air New Zealand v Commerce Commission [2007] 2 NZLR 949. The amounts are reasonable; b) Travel costs. The defendant says the travel costs to and from Wellington for one of the one day hearings was excessive. I reject that. These were the actual costs incurred. The plaintiff must accept its decision to hold the litigation in Wellington was, if it lost, going to cause it increased costs; c) Defendant's claims for agency fees, photocopying charges, telephone charges, courier charges and research charges are the plaintiff says, normally subsumed by the 2B charge. Photocopying charges and research charges are in my view properly part of the general expense of the proceeding and are subsumed into the costs of allowances. They are not claimable. I take a different view of agency fees which are actual disbursements incurred by the defendant and paid by the defendant. As to telephone toll charges and courier charges they are also a particular expense incurred with regard to a particular file. They are claimable.[15] The defendants, therefore, should submit to the Registrar for approval a costs order based from this judgment. __________________________ Ronald Young JSolicitors: Morrison Kent, PO Box 10035, Wellington, email: paul.michalik@morrisonkent.com Lee Salmon Long, PO Box 2026, Shortland Street, Auckland, email: davey.salmon@lsl.co.nz