The Minister of Education v James Hardie New Zealand [2018] NZHC 2960

The Minister of Education v James Hardie New Zealand [2018] NZHC 2960 [15 November 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2013-404-1899[2018] NZHC 2960UNDER Consumers Guarantee Act 1993, the FairTrading Act 1986 and the Building Act 2004BETWEEN THE MINISTER OF EDUCATION ANDOTHERSFirst to Fourth PlaintiffsAND JAMES HARDIE NEW ZEALANDFirst DefendantSTUDORP LIMITEDSecond DefendantCARTER HOLT HARVEYThird Defendant..../continueHearing: On the papersCounsel: JA Farmer QC, NF Flanagan and J Carlyon for MinistryJG Miles QC, M Heard and ED Nilsson for Carter Holt HarveyLimitedTC Weston QC, JRJ Knight and DJ Barr for CouncilsJudgment: 15 November 2018JUDGMENT OF FITZGERALD J[As to costs in relation to judgment on separate question/pleadings issues]This judgment was delivered by me on 15 November 2018 at 3:30pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors: Meredith Connell, AucklandLeeSalmonLong, AucklandSimpson Grierson, AucklandDefendants continuedCSR BUILDING PRODUCTS (NZ)LIMITEDFourth DefendantAND AUCKLAND COUNCIL AND OTHERTERRITORIAL AUTHORITIES LISTEDIN SCHEDULE 1 TO THE FIRSTAMENDED STATEMENT OF CLAIM BYTHIRD DEFENDANT AGAINST FIRSTTO FIFTIETH THIRD PARTIESFirst to Fiftieth Third PartiesIntroduction[1] By judgment dated 21 June 2018, I determined a number of interlocutoryapplications, being:(a) the Ministry's application for determination of a separate question;(b) Carter Holt's application for trial directions (including in relation totrial staging and for leave to file a counterclaim); and(c) the Ministry's strike out application in relation to two aspects of CarterHolt's pleadings.[2] I granted the Ministry's application for determination of a separate question.As a consequence, the Ministry successfully opposed Carter Holt's application for trialstaging. I granted the Ministry's application to strike out certain aspects of CarterHolt's pleadings. Finally, I granted leave to Carter Holt to file a counterclaim.[3] In my judgment, I encouraged the parties to seek to agree costs. Carter Holtand the Councils have agreed that Carter Holt is to pay the Councils costs of $14,465.[4] Carter Holt and the Ministry have not, however, been able to agree costs. Thereis also a costs issue in relation to Carter Holt's application to recall my judgment whichin the event, it did not pursue.[5] By way of summary of the Ministry and Carter Holt's respective positions oncosts:(a) Carter Holt accepts the Ministry is entitled to costs on the Ministry'sapplication for determination of a separate question, and the Ministry'sopposition to Carter Holt's trial staging application. The parties do notagree, however, the appropriate banding (for scale costs purposes) ofthose applications.(b) Carter Holt also accepts the Ministry ought to be awarded costs inrelation to the strike-out application. The Ministry seeks indemnitycosts. Carter Holt does not accept indemnity costs are appropriate, andsays costs should be ordered on a scale basis.(c) On the recall application, the Ministry again seeks indemnity costs,which Carter Holt says is inappropriate. It accepts the Ministry oughtto be awarded costs on the recall application, but again on a scale basis.(d) Carter Holt also proposes an "in the round" discount to the scale coststo be awarded to the Ministry, to reflect the measure of success CarterHolt says it had on its application, including being granted leave to filea counterclaim.Approach[6] The key principles in relation to costs are not in dispute:(a) The ordinary approach to the determination of costs is that thesuccessful party overall should be awarded costs on a scale basis.1(b) Where the successful party has not been successful to the full extent ofits claims, it may be appropriate to apply a discount to the costs awardto reflect that fact. Discounts of that sort are to be considered "in theround".2(c) When applying the scale costs regime, the Court must consider eachformal step individually for the purposes of assessing the appropriate"time band". A blanket assessment is not appropriate.3(d) Apart from the specific situations set out in r 14.6(4)(c)–(e), indemnitycosts are awarded only where the unsuccessful party "has behavedeither very badly, or very unreasonably" including by engaging in1 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109; [2013] 1 NZLR 305 at [8].2 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [18]; Weaver v AucklandCouncil [2017] NZCA 330 at [18].3 Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544, (2007) 18 PRNZ 743 at [35]."flagrant misconduct".4 The threshold is high. And even where thethreshold is met, a claimant will only be entitled to costs incurred thatare reasonable in the circumstances.[7] I make one further observation. It is, in my view, becoming increasinglycommon for successful parties in commercial litigation (not confined to thisproceeding) to seek increased and/or indemnity costs. That is often on the basis theparty has been successful, but without detailed or significant analysis of why the otherparty's conduct appropriately falls within those relatively limited circumstances inwhich increased and indemnity costs are appropriate. In relation to indemnity costs inparticular, the threshold is indeed high. As I stated in AFI Management Pty Ltd vLepionka and Company Investments Ltd:5[15] Indemnity costs may be awarded if "the party [against whom costs aresought] has acted vexatiously, frivolously, improperly, or unnecessarily incommencing, continuing, or defending a proceeding or a step in theproceeding".6 Indemnity costs may also be awarded if some other reasonexists justifying the imposition of indemnity costs.7[16] In Bradbury v Westpac Banking Corp, the Court of Appeal explainedthat indemnity costs may be awarded where a party has behaved either badlyor very unreasonably.8 It contrasted the jurisdiction to grant increased costs,being directed to simple unreasonableness, with the jurisdiction to grantindemnity costs, being directed to "distinctly bad behaviour".9 Examples ofthe latter were:10(a) making allegations of fraud knowing them to be false;(b) particular misconduct causing loss of time to the Court and otherparties;(c) commencing or continuing a proceeding for some ulterior motive;(d) doing so in wilful disregard of known facts or clearly established law;and(e) making allegations which ought never to have been made or undulyprolonging a case by groundless contentions – i.e. persisting in whatshould on proper consideration be seen to be a "hopeless case".4 Andrew Beck and others McGechan on Procedure (Thomson Reuters, online ed) at[HR14.6.03(1)(a)].5 AFI Management Pty Ltd v Lepionka and Company Investments Ltd [2018] NZHC 1285.6 High Court Rules 2016, r 14.6(4)(a).7 Rule 14.6(4)(f).8 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].9 At [26].10 At [29].[17] As is evident from the above, indemnity costs are reserved foregregious conduct.DiscussionBanding for trial staging applications[8] The Ministry seeks costs on the trial staging applications on a Category 3Cbasis. The Ministry submits that formulating a suggested approach to staging aproceeding of this magnitude was a complex exercise and required detailedconsideration of the scope and nature of the evidence the Ministry would call. It alsosubmits it required extensive research into approaches taken to staging large-scalelitigation in overseas jurisdictions, where large product liability claims are moreroutinely before the courts.[9] The Ministry further submits Carter Holt's own application required a detailedresponse and opposition. It says "unpicking" Carter Holt's proposal was a time-consuming exercise. The Ministry notes Carter Holt filed six separate affidavits insupport of that application, all of which had to be considered and, where necessary,responded to.[10] Carter Holt, on the other hand, submits these interlocutory applications werenot especially complex or time-consuming such as to warrant a banding for all stepsof Category C. It says that when the applications are looked at closely, no particularstep taken by the Ministry required a "comparatively large amount of time" for thepurposes of r 14.5(2)(c). It notes that no evidence was filed in support of theMinistry's application, but rather two affidavits were filed by the Ministry in reply toCarter Holt's evidence. It also says that while the parties' written submissions weresomewhat longer than the default 10-page limit, their length was not out of theordinary in the context of any interlocutory application of importance in high valuecivil litigation.[11] These proceedings have been categorised as Category 3 for cost purposes. AsI observed in an earlier judgment, the proceedings are "extremely large, probably thelargest claim currently before the High Court".11 It does not necessarily follow,however, that Band C ought to apply to all steps in the proceeding, or even all stepsfor which costs are allocated on an interlocutory application. As Carter Holt submits,each step must be considered separately and may attract different bandings for costspurposes.[12] I am satisfied an appropriate outcome on both applications is that band Bapplies to all steps other than preparation of submissions, which are appropriatelyawarded on a band C basis.[13] I accept Carter Holt's submission that while these proceedings are verycomplex, the formulation of the separate question on the Ministry's approach and theresponse to Carter Holt's proposal were not particularly complex, at least whencompared to similar applications for separate questions in large commercial litigation.Further, the Ministry did not file a significant volume of affidavit material on theseapplications. The Ministry's own evidence was not out of the ordinary when comparedto similar interlocutory applications.[14] I accept, however, that given the nature of the proceeding and the fact large-scale product liability claims in negligence are not routinely before the courts in thisjurisdiction, the legal aspects of the application, including research and considerationgiven to international jurisprudence, take this matter into band C for legal submissions.[15] Accordingly, on the Ministry's application for determination of a separatequestion and Carter Holt's application for trial staging, there are costs orders in favourof the Ministry on a 3B basis, save for the preparation of legal submissions, which areawarded on a 3C basis.[16] For completeness, I do not accept the length of the written submissions willordinarily be an appropriate guide or relevant factor to banding for costs purposes oninterlocutory applications. In theory at least, all written submissions on interlocutoryapplications will be no more than 10 pages in length. And, it is not the length of thewritten submissions per se which is determinative, but the complexity of the issues to11 Ministry of Education v James Hardie Ltd [2018] NZHC 1481 at [4].be determined and the time involved in preparing and formulating the argumentsreflected in those submissions.Ministry's indemnity costs on its strike out application[17] As noted above the Ministry claims indemnity costs on its strike outapplication.[18] The Ministry submits I ought to order indemnity costs given Carter Holtmaintained an affirmative long-stop defence notwithstanding the Supreme Court'sdetermination on that issue earlier in this proceeding. Relying on observations of theCourt of Appeal in Bradbury v Westpac Banking Corp,12 the Ministry says that despitethe clear observations of the Supreme Court in its strike out judgment, Carter Holtmaintained aspects of its pleading and only agreed to remove the relevant aspect of itspleading when it filed its notice of opposition on 21 November 2017.[19] Carter Holt does not address the Ministry's arguments about the long-stopdefence in its costs submissions.[20] I accept the Ministry's position that it ought not to have had to bring aninterlocutory application to address these particular aspects of Carter Holt's pleading.However, given it brought an application to strike out other aspects of Carter Holt'spleadings, any additional work on this aspect of the application would have been, inmy view, relatively modest. In these circumstances, I consider the appropriateapproach is for an equally modest increase to scale costs to reflect this aspect of theMinistry's application.[21] In relation to the second aspect of the Ministry's strike out application,13 I amnot persuaded indemnity costs are appropriate. I accept Carter Holt's submission thata finding that a part of a pleading amounts to an abuse of process for the purpose ofthe Court's strike out jurisdiction is, without more, not sufficient to warrant indemnity12 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400.13 Namely applying to strike out Carter Holt's pleading that further and better particulars of theMinistry's claim were required, against the backdrop of the parties having agreed no furtherparticulars were required.costs. The focus must be on the conduct of the party opposing costs or the manner inwhich it defends such an application, which might justify indemnity costs. A merefinding of abuse of process does not do so. Were that to be the case, then many strike-out applications resolved on the basis that a claim (or an aspect of it) is an abuse would,without more, automatically attract indemnity costs.[22] I do not accept Carter Holt's submission that the passage of time and changesin circumstances since the parties agreed no further particulars were required justifiedreconsideration of the question of particulars (at least as between the parties).Nevertheless, argument on the application appropriately ventilated the need for theMinistry to provide particulars of its loss in due course. In addition, the issues andarguments on the application were not as straightforward as might have been expectedif the argument was "hopeless" from the outset. In all of the circumstances, I considera scale costs award on a 3B basis is appropriate, with the modest increase referred toabove.[23] On the Ministry's application to strike out aspects of Carter Holt's pleading, Iaward scale costs on a 3B basis, uplifted by 20 per cent.The recall application[24] Again, the Ministry seeks indemnity costs on this application. It notes that inresponse to Carter Holt's application, work was undertaken to respond to thatapplication as a matter of urgency. It says unnecessary resources were expended onan application which was then abandoned. It submits (though does not reference anyauthorities) that unmeritorious applications for recall are an abuse of the court'sprocess. The Ministry says it incurred approximately $6,500 in responding to therecall application and seeks recovery of those costs in full.[25] Carter Holt says there is no basis upon which to award indemnity costs. Itsubmits it formed a view the judgment ought to be recalled to seek a minor clarificationin respect of one specific passage, and that the particular steps taken by Carter Holt inthis regard were appropriate and reasonable in the circumstances. After initialengagement with the Court and the Ministry on the application, and for what it saysare reasons unconnected with its underlying merits, Carter Holt formed the view notto pursue it. It also submits that the costs claimed cannot be justified as reasonableactual costs in any event, when a 3B scale entitlement for steps taken in relation to theapplication (appearance at a telephone conference) are limited to $990.00.[26] Again, I am not persuaded Carter Holt's conduct in relation to the recallapplication falls within the category of conduct reserved for indemnity costs. Withouthaving determined the recall application, it is also not appropriate to form what iseffectively a final view on its merits for the purposes of costs. I do not agree, however,that any scale costs awarded should be limited to the telephone conference before theCourt. There is no doubt that, while a formal notice of opposition and evidence wasnot required from the Ministry, it would have had to have taken some additional stepsto consider the recall application, engage with Carter Holt on it and prepare and filememoranda for the telephone conference.[27] To reflect the steps required in addition to the telephone conference, I considerthe appropriate approach is to award costs to the Ministry on a scale 3B basis, withreference to the step of a telephone conference, though uplifted to reflect the additionalwork involved. There is accordingly an order of scale 3B costs in relation to CarterHolt's application for recall, increased by 50 per cent to reflect additional work thatwas no doubt undertaken by the Ministry in response.Discount for Carter Holt's partial success[28] As noted above, Carter Holt seeks a 25 per cent "in the round" discount acrossall costs awarded to the Ministry, to reflect Carter Holt's submission that it enjoyed ameasure of success on the matters addressed in my judgment. It points to the fact thatits application for leave to commence a counterclaim against the Boards of Trusteeswas opposed by the Ministry, but Carter Holt was successful in its entirety. It alsonotes that while no formal orders were made in relation to its application for directionsrelating to contributory negligence defences, its application led to an agreed positionbeing reached through discussion at the hearing.[29] The Ministry submits these aspects of Carter Holt's application were so minorin the context of the remaining matters considered at the hearing and in the judgmentthat they ought not to have any bearing on the costs award. It also notes that but forthe question of leave to file a counterclaim, the position on the directions sought byCarter Holt was agreed by the parties. It submits its opposition to the application forleave was entirely appropriate given the very lengthy delay in filing the counterclaim,which was recognised in the judgment by the observation that the reasons given forthe delay were not particularly convincing.[30] I am not satisfied Carter Holt's success on these matters, albeit minor, shouldhave no impact on costs. While I accept these issues were relatively minor in thecontext of the other matters considered at the hearing, there is no doubt they wouldhave attracted some actual time and cost in dealing with them. Further, the agreedposition reached between the parties on certain matters was a result of discussion andagreement in the lead up to and at the hearing itself, which may not have occurred hadthe application not been brought.[31] I therefore consider a relatively modest discount to the costs to be awarded tothe Ministry ought to be made to reflect Carter Holt's partial success on its ownapplication. I do not accept, however, this ought to be as high as 25 per cent, or acrossall costs awarded to the Ministry. Ultimately, those matters on which Carter Holt wassuccessful were a small part of its own application for trial directions. They did notform part of the Ministry's own application for determination of a separate hearing orthe Ministry's application to strike out aspects of Carter Holt's pleading. Nor werethey related to the recall application.[32] I accordingly conclude the appropriate approach is to discount the costsawarded the Ministry on its (largely successful) opposition to Carter Holt'sinterlocutory application for trial directions. Given the relatively modest time andeffort spend on those matters on which Carter Holt was successful, a discount of 10 percent to the costs awarded to the Ministry on Carter Holt's application is an appropriateoutcome.Disbursements[33] The Ministry also seeks recovery of various disbursements. Carter Holtaccepts those disbursements are appropriate. I agree.Conclusion[34] I accordingly make orders for costs and disbursements of $50,388.00 in favourof the Ministry as set out in the attached schedule.[35] By consent, I also make an order that Carter Holt pay the Councils the sum of$14,465.00 by way of costs.____________________Fitzgerald JStep Description Band Days AmountCostsCosts claimed22 Interlocutory application by plaintiffs for determination ofseparate questionB 0.6 $1,980.0023 Plaintiffs' notice of opposition to Carter Holt's applicationfor directions(less 10 per cent discount)B 0.6 $1,782.0024 Preparation of written submissions in support of separatequestion applicationC 3 $9,900.0024 Preparation of written submissions in opposition to CarterHolt's application for directions(less 10 per cent discount)C 3 $8,910.0025 Preparation by applicant of bundle for hearing B 0.6 $1,980.0026 Appearance at hearing of defended application for principalcounsel1.5 $4,950.0027 Second counsel 0.75 $2,475.00Application to strike out part of Carter Holt's defence22 Interlocutory application by plaintiffs(plus 20 per cent increase)B 0.6 $2,376.0024 Preparation of written submissions(plus 20 per cent increase)B 1.5 $5,940.00Recall application13 Appearance at case management teleconference(plus 50 per cent increase)B 0.3 $1,485.00Disbursements9(c) Interlocutory application filing fee (separate question) $500.009(c) Interlocutory application filing fee (strike out) $500.0014(c) Notice of opposition to application for directions $110.00High Court hearing fee $4,800.00Expert affidavit of Greg O'Sullivan $2,700.00Total costs $42,273.00Total disbursements $8,610.00Total award $50,388.00