SAVVY VINEYARDS 3784 LTD v ARCK LTD [2014] NZHC 1327

SAVVY VINEYARDS 3784 LTD v ARCK LTD [2014] NZHC 1327 [13 June 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2012-404-007725[2014] NZHC 1327BETWEEN SAVVY VINEYARDS 3784 LIMITEDformerly known as GOLDRIDGEESTATE VINEYARDS 3784 LIMITEDPlaintiffAND ARCK LIMITEDDefendantHearing: On the papersAppearances: N Penman-Chambers for the PlaintiffS F Gaines for the DefendantJudgment: 13 June 2014COSTS JUDGMENT OF GILBERT JThis judgment is delivered by me on 13 June 2014 at 11ampursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarIntroduction[1] In a judgment delivered on 5 May 2014, I made declarations sought by the plaintiff that grape supply agreements and vineyard management agreements between the parties remain legally binding and on foot.1 I found in favour of the defendant that the plaintiff had not given notice of the exercise of its option to purchase in accordance with either of the grape supply agreements and accordinglydismissed the plaintiff's claims for losses resulting from the non-supply of the 2012 and 2013 vintages. I found for the plaintiff in relation to the dispute as to how the purchase price is to be calculated under the grape supply agreements. I expressed the preliminary view that the plaintiff was entitled to costs on a 2B basis but invited memoranda if either party contended for a different outcome.[2] Memoranda have now been filed. Neither party agrees with my preliminary view.[3] There is no dispute that this is a category 2 proceeding and that band B allows a reasonable amount of time for all relevant steps in the proceeding. There is also no dispute that 2B costs for all relevant steps amount to $40,297.50 and that the recoverable disbursements total $10,993.02, giving a total of $51,290.52. However, the plaintiff seeks a 50 per cent uplift pursuant to r 14.6(3)(ii) of the High Court Rules on the basis that the defendant contributed unnecessarily to the time and expense of the proceeding by pursuing defences that lacked merit. The defendantresists the plaintiff's application for increased costs and submits that although the plaintiff is entitled to an award of costs, this should be reduced by 50 per cent to reflect the measure of success achieved by both parties.Did the defendant contribute unnecessarily to the time and expense of the proceeding by pursuing defences that lacked merit?[4] At the time the trial commenced, the defendant resisted the plaintiff's claimon the following bases:21 Savvy Vineyards 3784 Ltd v ARCK Ltd [2014] NZHC 903.2 First amended statement of defence dated 18 April 2013.(a) the plaintiff has not exercised its option to purchase in terms of the grape supply agreements;(b) the grape supply agreements are void for uncertainty because there is no method for fixing the price for grapes harvested in excess of the target cropping level;(c) alternatively, the grape supply agreements are unenforceable to the extent that they apply to any grapes harvested in excess of the target cropping level because there is no consideration for the supply of such grapes;(d) the grape supply agreements were validly cancelled by the defendant on 10 February 2012;(e) the defendant is not liable for payment of vineyard management fees because payment is conditional on performance;(f) the defendant was induced to enter into the grape supply agreements by a misrepresentation by or on behalf of the plaintiff that it was necessary to cap the tonnage of grapes harvested from the land to the target cropping level to achieve quality grapes;(g) the defendant was induced to enter into the deeds of assignment and novation of the grape supply agreements by a misrepresentation that it was necessary to assign the grape supply agreements to an independent third party;(h) in entering into the grape supply agreements the defendant was influenced by a mistake that it was necessary to limit the harvest of grapes to the target cropping level to achieve quality grapes; and(i) alternatively, the plaintiff and the defendant were both influenced in their respective decisions to enter into the grape supply agreements by the same mistake.[5] All but the first of these defences were abandoned during the course of the trial. The defendant succeeded in relation to its sole remaining defence.[6] The defences listed at (b) and (c) above did not require additional evidence and, had they been pursued, would have simply required legal submission based on the agreements viewed in context. The defence listed at (e) was conceded by theplaintiff. Mr Jones QC accepted at the trial that the plaintiff's remedy is in damages and that the plaintiff is not entitled to claim management fees as a debt. These defences did not contribute significantly to the expense of the proceeding and, in my view, could not justify increased costs.[7] The defences listed at (d), (f), (h) and (i) were all founded on the defendant'scontention that it understood from the plaintiff in the discussions leading up to the execution of the agreements that the target cropping levels were designed to ensure the production of quality grapes. These defences were not tested because they were abandoned. It does not follow from the mere fact that they were abandoned that the defences were devoid of merit and contributed unnecessarily to the expense of the proceeding. I accept that the defendant's directors, both of whom gave evidence, genuinely believed that they had an appropriate factual foundation to support the defences of misrepresentation and mistake. I am not persuaded that their position was so obviously lacking in merit that the defendant should pay increased costs as a result of having advanced these defences.[8] That leaves the defence listed at (g). I do not consider that this defence contributed to the time or expense of the proceeding such that it could justify an award of increased costs.[9] Finally, Ms Penman-Chambers submits that the defendant's interpretation ofthe purchase price payable under the grape supply agreements was wholly without merit. While I concluded that the wording of the relevant clause was clear, I do notaccept that the defendant's position on this issue was so lacking in merit that anincreased costs award should be ordered. The defendant did not, in my view, contribute unnecessarily to the time or expense of the proceeding by pursuing its contention on this issue.[10] The defendant acted responsibly in the way it prepared and presented its case. It chose to abandon all but one of its defences at trial but these defences were not hopeless such that they should never have been pursued. In my view, it would be wrong to penalise the defendant with an increased costs award because it chose to abandon a number of its defences. The defendant's decision to abandon thesedefences resulting in some saving of time and cost and cannot be characterised as unreasonable. I conclude that this is not a case in which a defendant has contributed unnecessarily to the time or expense of the proceeding by pursuing unmeritorious arguments such that an increased costs award should be made.Should costs be reduced to reflect the partial success achieved by the defendant?[11] The defendant achieved some success in the proceeding in that the plaintiff failed to prove that it had exercised its option to purchase the grapes for the two year period for which it claimed damages. However, the plaintiff remains free to exercise the option if it wishes and the agreements have a potential term of 50 years. There is no doubt that the plaintiff succeeded overall. The plaintiff obtained declarations that none of these long term agreements for grape supply and vineyard management was validly cancelled and that the price payable must be calculated in the manner it contended for.[12] Further, the evidence relating to service of the notices was brief. Indeed, the plaintiff failed on this issue for want of proof rather than following detailed analysis of extensive evidence. This issue did not significantly increase the costs of thedefendant in relation to the proceeding overall. I do not consider that the plaintiff'sfailure to prove this part of its case could justify a reduction in the costs to which it would otherwise be entitled.Result[13] The plaintiff is entitled to costs calculated on a 2B basis in the sum of $40,297.50 plus disbursements of $10,993.02._____________________M A Gilbert J