KEEZZ LTD (NZCN 6836013) v TE WHATU ORA – HEALTH NEW ZEALAND [2023] NZHC 1744

KEEZZ LTD (NZCN 6836013) v TE WHATU ORA – HEALTH NEW ZEALAND [2023] NZHC 1744 [6 July2023]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV-2019-419-000268[2023] NZHC 1744BETWEEN KEEZZ LTD (NZCN 6836013)First PlaintiffKEEZZ PTY LTD (CAN 116 327 005)Second PlaintiffAND TE WHATU ORA – HEALTH NEWZEALAND (FORMERLY WAIKATODISTRICT HEALTH BOARD)DefendantHearing: (On the papers)Judgment: 6 July 2023COSTS JUDGMENT OF VENNING JThis judgment was delivered by me on 6 July 2023 at 12.30 pm, pursuant to Rule 11.5 of the HighCourt Rules.Registrar/Deputy RegistrarDateSolicitors: McLeod & Associates, AucklandBuddle Findlay, WellingtonCounsel: A R Gilchrist, AucklandA V Shinkarenko, Auckland[1] In its substantive judgment of 1 June 2023,1 the Court dismissed the plaintiffs'claims and entered judgment for the defendant. As to costs the Court said as follows:2Costs should follow the event. Costs on a 2B basis with an allowance forsecond counsel would seem appropriate. However, I reserve the issue of costsin case there has been any relevant exchange between the parties on that issue.Any costs memoranda by WDHB to be filed and served without 20 workingdays. Any response by Keezz 10 working days later, with any reply withinfive working days. Submissions are to be limited to five pages.[2] The parties have been unable to resolve the issue of costs.3 The defendantseeks scale 2B costs with a 50 per cent uplift, totalling $127,984.50, together withdisbursements in the sum of $76,222.86 (excluding GST), (in total $204,207.36).[3] The plaintiffs' position is that costs to scale with no uplift and reasonabledisbursements should be awarded. The plaintiffs calculate costs of $68,593 withdisbursements of $40,400.03 (in total $108,993.03).[4] The parties agree on the broad principles. They differ on the application ofthose principles.[5] The plaintiffs take issue with a number of the steps claimed by the defendant.The common bundle[6] The plaintiffs submit they should not pay the defendant's costs claimed for theelectronic common bundle. The rules provide for an allowance for preparation of thecommon bundle. While the bundle is commonly prepared by the plaintiffs, in this caseI accept on the basis of counsels' memoranda that the defendant was required to co-ordinate the final bundle. It is entitled to recover the costs of doing so.The costs associated with subpoenaing Dr Howard[7] The plaintiffs submit the fact Dr Howard was a reluctant witness is not a matterwhich they should have to pay for. Again, however, I accept that given Dr Howard1 Keezz Ltd v Te Whatu Ora – Health New Zealand [2023] NZHC 1360.2 At [188].3 Defendant filed an initial memorandum on 16 June 2023, and a reply memorandum on 4 July2023. Plaintiffs filed a memorandum in response on 28 June 2023.was off-shore it was necessary to issue a subpoena to ensure his attendance and toprotect the defendant's position in the case of his non-attendance. Indeed, as thedefendant's counsel submit in response, the fact he was prevented from leaving thecountry by his CEO and the Minister of Health during the week of the trial due tourgent business confirmed the need for the subpoena. As it was his evidence wasrequired to be given by AVL.[8] I accept the defendant is entitled to the costs associated with obtaining andserving the subpoena on Dr Howard, but I do not consider there should be an uplift onthose costs.The costs on costs issue[9] In Strata Title Administration Limited v Body Corporate Administration Ltdthe Court of Appeal implicitly recognised the jurisdiction to award costs on a costsapplication.4 There is no reason in the present case not to exercise the discretion ofthe Court and award costs on the memoranda dealing with the issue. Again, however,no uplift should apply to those costs.Individual items[10] The plaintiffs submit that four of the memoranda claimed for by the defendantshould not be recoverable. I accept the force of the plaintiffs' submission in relationto the memorandum of 20 March 2020 as it was a memorandum seeking an extensionof time for bringing an application and the memorandum of 18 December 2020 whichsought an extension to the agreed timetable to file discovery. However, although theother two memoranda were prepared by the plaintiffs they required consideration andattention by the defendant. They are properly recoverable.The list of documents[11] The plaintiffs take the view that the defendant should not recover two differentamounts for discovery. The defendant's response is that there is an ongoing obligation4 Strata Title Administration Limited v Body Corporate Administration Ltd [2014] NZCA 96 at[10]–[14].in relation to discovery and costs should be allowed. I consider the issue of a secondallowance for discovery is related to the disbursements claimed for the electronicdiscovery which at $20,509.82 is a significant cost. Given that I propose to allow thatdisbursement and accepting the plaintiffs' submission that part at least of the furtherrelevant documents arose because certain documents were incorrectly discovered inpart 2 of the initial list and should have been discovered in part 1, only one, rather thantwo allowance for discovery of $5,975 is appropriate.Inspection[12] The two amounts claimed for inspection relate to the two separate discoverylists provided by the plaintiffs. There is no reason not to allow both amounts claimedin relation to that.General preparation for trial[13] While the trial was completed within four and a half days, the rules provide anallowance of one day for the first to fifth hearing days. I allow the full amountsclaimed.The uplift claimed[14] The defendant relies on r 14.6(3)(b) of the High Court Rules 2016 to supportits submission that an uplift to scale costs is appropriate in this case. The defendantsays the plaintiffs contributed unnecessarily to the time and expense of the proceedingby:(a) unreasonably rejecting five settlement offers;(b) pursuing, and then abandoning, unmeritorious claims;(c) pursuing arguments that lacked merit;(d) adducing large amounts of irrelevant evidence;(e) calling expert evidence from Mr Kemp, the forensic accountant, despitethe parties agreeing there would be no expert evidence;(f) failing to appreciate the defendant's position and maintaining agreedfacts were disputed;(g) failing to prepare the common bundle and casebook on time,competently, or in accordance with the Rules;(h) making no attempt to agree a chronology.[15] A number of the matters raised by the defendant to support the uplift in costsare matters that can and do arise in the course of civil proceedings generally. Further,the arguments about the Services Agreement, the issue of whether Keezz AU or KeezzNZ cancelled the Services Agreement and the suggestion the At Risk Fee (ARF)became payable when the defendant included promised savings in its budget at thestart of the Surgical Services Reinvention Project (SSRP) were points which ultimatelymay have lacked merit, but really occupied little of the Court time. A similar pointcan be made in relation to the plaintiffs' apparent misunderstanding andmisrepresentation of the defendant's position regarding the issue of where the savingsneeded to be banked, whether the SSRP was actually successful, and whether thedefendant was willing to pay the ARF if the contractual pre-conditions were met.While the plaintiff's position may have been misguided, ultimately the points were notmaterial in terms of time.[16] Next, while the plaintiffs called expert evidence the defendant was able torespond to it with its own expert. It is not unreasonable for a party on reflection, toconsider further evidence may be required to boost their case, and indeed a reasonablepart of the case involved consideration of whether, as a fallback position, the projectedsavings were realistic. Mr Kemp's evidence was relevant to that. To the extent thisextended the hearing, that is reflected in the time allowance for the hearing.[17] Generally, counsel for both the plaintiffs and defendant presented their casesresponsibly and cooperated to ensure the case was concluded within the timeframe setby the Court. Mr Boyd's brief of evidence did include inadmissible matters andmatters which were not entirely relevant but again I do not consider those issuessufficient, on their own, to support increased costs.[18] In my judgment the principal matters that support an increased cost award inthis case is the plaintiffs' failure to accept a reasonable settlement offer, and theadditional and ultimately wasted cost incurred by the defendant in responding to theclaims of breach of the Fair Trading Act and misrepresentation and misleading anddeceptive conduct which were only abandoned at the conclusion of the evidence. Bythat stage the defendant had been required to fully prepare a response to them.[19] In the present case the defendant made a number of offers of settlement. On18 December 2019, after filing the statement of defence, the defendant offered to payNZD 75,000 to settle the dispute in response to the plaintiffs' demand. The defendantmade further offers on 27 November 2020 and prior to discovery. The defendant thenmade yet further offers for NZD 50,000 on 5 May 2021 (following discovery), on 18May 2022 (after the matter was set down for trial), and at the mediation on 12December 2022. I agree that there was no sensible counteroffer to the later two offers.[20] As the Court noted in Weaver v HML Nominees Ltd a successful Calderbankoffer does not of itself give rise to entitlement to increased or indemnity costs as theyremain at the Court's discretion.5 The assessment of whether increased costs shouldbe awarded and extend to the increase can be impacted by a number of factors,including:(a) the size of the offer relative to the actual costs;(b) the amount of the claim;(c) the reasonable expectation of the parties that refuses the offer;(d) the amount of preparation for trial already undertaken;5 Weaver v HML Nominees Ltd [2016] NZHC 473 at [30].(e) whether the proceeding concerned an uncertain area of law;(f) whether the parties are in a position to assess the merits when the offerwas received;(g) the information available to the party who receives the offer and theextent to which they can assess the offer;(h) the timing of the offer; and(i) the conduct of the offeror.[21] I consider that the settlement offer of $50,000 in May 2021 following discoverywas a reasonable one. It was made at a time when the proceedings had been on footfor some time and discovery had been completed. The plaintiffs should have been ina position to undertake a proper assessment of the offer. The discovery should havedisclosed the weaknesses in the plaintiffs' case and the internal conflict on someaspects.[22] As noted, the plaintiffs also withdrew two of its causes of action at theconclusion of the evidence. There was always an issue for the plaintiffs with thoseclaims, given the entire agreement clause in the Services Agreement.[23] Finally, I accept the defendant has acted reasonably in all the circumstances.For the above reasons I consider an uplift of 50 per cent is appropriate for all stepstaken by the defendant from 30 May 2021, with the exception of the costs associatedwith obtaining the subpoena, the costs memoranda and sealing the costs order whichI allow for at the standard 2B scale.[24] On my calculation, that leads to a costs figure of $101,216.50 in accordancewith the attached schedule.Disbursements[25] Rule 14.12 confirms that a disbursement is an expense paid or incurred for thepurposes of the proceeding that would ordinarily be charged for separately from theLegal Services. A disbursement must be included in a costs award if it is approved bythe Court for the purpose of the proceeding, is specific to the conduct of theproceeding, and is reasonably necessary and reasonable in amount.[26] Apart from the standard disbursements payable under r 14.12(1)(b), thedisbursements sought in the present case include the costs associated with the serviceof the subpoena, the expert witness Mr Shaw's costs, and some miscellaneous costsassociated with trial preparation and attendance.[27] The plaintiffs take issue with the additional disbursements associated with out-of-town counsels' travel and accommodation costs. The claim against the defendantinvolved challenges to and criticism of the senior management of the WDHB. WDHBwas entitled to instruct counsel of choice and counsel that the WDHB had an ongoingrelationship with. The disbursements of senior and second counsel are appropriatelyclaimed.[28] Save for the additional third counsel, I approve the disbursements as beingincurred for the purposes of the proceeding, and as being reasonably necessary andreasonable in amount. I do not, however, allow the disbursements associated withthird counsel. Approval was given for second counsel but not for third counsel.[29] As noted, the disbursements associated with the electronic discovery preparedby McGrathNicol Limited are significant – $20,509.82. However, as also noted, therehas been a reduction in overall costs claimed by the defendant for discovery. TheCourt has reduced the amount claimed for discovery by $5,975. In my judgment,given the documentation that was put before the Court for the hearing the resultantcosts associated with discovery (both in terms of scale and the disbursements) arereasonable in a case of this nature.[30] The plaintiffs also took issue with the costs associated with Mr Shaw'sevidence. The Court accepted Mr Shaw's evidence and preferred it to the evidence ofMr Kemp. I accept the force of the submission made by the defendant that the scopeof Mr Shaw's evidence would have been less were it not for Mr Kemp's extensivereply brief. I approve the amount of disbursements claimed for Mr Shaw's evidence.[31] The end result for disbursements calculated as above is $74,500.90.Result[32] The plaintiffs are to pay the defendant's costs of $101,216.50, together withdisbursements of $74,500.90, in total $175,717.40.[33] I make an order authorising the Registrar to disburse the amount held forsecurity for costs together with any interest accrued on that sum to the defendant'ssolicitors in part payment of the costs order.__________________________Venning JSchedule 1 - costsItem StepAllocated days(band B)Cost (category 2 -$2,390per day) ($)2Commencement of defenceby defendant (statement ofdefence dated 3 December2019) 2 4,780.009Pleading in response toamended pleading(statement of defence to firstamended statement of claimdated 28 May 2021) 0.6 1,434.0010Preparation for first casemanagement conference(including discussion aboutdiscovery) on 11 February2020 0.4 956.0011Filing memorandum dated21 January 2020 for firstcase managementconference 0.4 956.0013Appearance at first casemanagement conference on11 February 2020 0.3 717.0011Filing joint memorandumdated 11 March 2020 0.3 717.0011Filing joint memorandumdated 3 November 2020seeking discovery orders 0.3 717.0011Filing joint memorandumdated 4 February 2021regarding discovery 0.3 717.0011Filing joint memorandumdated 13 April 2021 seekingpre-trial directions 0.3 717.0011Filing joint memorandumdated 1 July 2022 regardingchange of defendant 0.3 717.0011Filing memorandum dated25 October 2022 regardingevidence 0.3 717.0011Filing joint memorandumdated 2 May 2023 regardingtrial matters 0.3 717.0011Filing memorandum dated 4May 2022 regardinginadmissible documents 0.3 717.00Item StepAllocated days(band B)Cost (category 2 -$2,390per day) ($)20List of documents ondiscovery (affidavit dated 5March 2021) 2.5 5,975.0021Inspection of documents(plaintiffs' initial trancheprovided on 5 March 2021) 1.5 3,585.0021Inspection of documents(plaintiffs' supplementarydiscovery provided on 25July 2022) 1.5 50% uplift – 5,377.5033Preparation of (7) briefs, listof issues, authorities,agreeing common bundle(and casebook) 5 50% uplift – 17,925.0033AAdditional allowance forwhichever party preparedcommon bundle (andcasebook) 0.5 50% uplift – 1,792.5033B Preparation for hearing 5 50% uplift – 17,925.0034Appearance at hearing forprincipal counsel 5 50% uplift – 17,925.0035Appearance at hearing ofsecond counsel as allowedby court 2.5 50% uplift – 8,962.5037Filing originating applicationto serve a subpoena on awitness in Australia andsupporting affidavit 2 4,780.0029Sealing orders to servewitness in Australia 0.2 478.0011Filing memorandum as tocosts 0.3 717.0011Filing reply memorandum asto costs (if incurred) 0.3 717.0029Sealing judgment and costsorders (to be incurred) 0.2 478.00Total 35.7 $101,216.50DisbursementsDisbursement Invoice Cost (exGST) ($)Disbursements claimed 76,222.86LESSFlights - Eilis Donnelly – trial (third counsel) 202305 399.13Accommodation - Eilis Donnelly – trial (thirdcounsel) 2023051,322.83Total 74,500.90