ALDRIDGE v HOLLOWAY [2021] NZHC 1801

ALDRIDGE v HOLLOWAY [2021] NZHC 1801 [16 July 2021]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2019-409-659[2021] NZHC 1801BETWEEN TIMOTHY JAMES ALDRIDGE,MICHELLE PATRICIA ALDRIDGE andALDRIDGE TRUSTEESERVICES LIMITED, as trustees of theALDRIDGE FAMILY TRUSTPlaintiffsAND JAMES ROBERT HOLLOWAYFirst DefendantAND MBSS LIMITED trading as MAXRaftSecond DefendantHearing: (Determined on the papers)Counsel: T J Mackenzie for PlaintiffsN P Gillies and C A Robertson for Second DefendantJudgment: 16 July 2021JUDGMENT OF ASSOCIATE JUDGE LESTER(Costs)This judgment was delivered by me on 16 July 2021 at 12.30 pmPursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy Registrar16 July 2021[1] On 14 June 2021, I delivered a judgment striking out the only cause of actionagainst the second defendant (MAXRaft).1 The cause of action in negligence wasstruck out on the basis that MAXRaft did not owe the plaintiffs, the trustees of theAldridge Family Trust (the Trust), a duty of care because the finding of a duty wouldhave been inconsistent with the contractual structure the Trust chose to put in place.[2] The judgment concluded by saying:2[77] Submissions as to costs may be made but if no submissions are madewithin 10 working days of the date of this judgment then the costs order shallbe that MAXRaft is awarded costs on a 2B basis for this application and theproceeding to date along with disbursements as fixed by the Registrar.[3] Counsel discussed costs following the release of the judgment and, shortlybefore the expiry of the 10 working days, MAXRaft filed a memorandum seekingincreased costs. There appears to be some suggestion by MAXRaft that because theTrust did not reply to those submissions within the 10 working days that the Trustshould not be heard on the issue of costs. I do not accept that.[4] Implicit from the fact that the Trust chose not to file submissions within the10 working day period is it accepted the default ruling that MAXRaft would be entitledto costs on a 2B basis. While there may have been correspondence between counsel,it was not for the Trust to reply to costs submissions it had not yet received when itwas content with the default ruling.[5] Accordingly, I have considered costs with the benefit of the memoranda filedby both counsel.MAXRaft's costs submissions[6] MAXRaft seeks increased costs on the grounds the Trust:contributed unnecessarily to the time or expense of the proceeding by:1 Aldridge v Holloway [2021] NZHC 1382.2 Above n 1.(a) Taking or pursuing an unnecessary step or argument that lacks merit[r 14.6.3(b)(ii) of the High Court Rules 2016];(b) Failing without reasonable justification to accept an offer ofsettlement [r 14.6(3)(b)(v)]; or(c) Some other reason which justifies making an order for increased costs[r 14.6(3)(d)].[7] MAXRaft's counsel, Mr Gillies, refers to one example of a case where therewas a 50 per cent uplift on 2B costs on the ground that the respondents had taken anunnecessary step by filing a joinder application that lacked merit and caused theapplicants unnecessary time and expense.3[8] In another case referred to by Mr Gillies, an uplift of 25 per cent was upheldby the Court of Appeal on the ground that the plaintiff's claim was without properjustification due to the allegations in that case being unsupported by the plaintiff'sexperts.4[9] MAXRaft also raises the possibility of indemnity costs. MAXRaft relies onBradbury v Westpac Banking Corp, where it is said the Court of Appeal endorsed theposition that indemnity costs can be awarded where a party continues a proceeding foran ulterior motive or in wilful disregard of known facts or clearly established legalprinciples, or where a party makes allegations which ought never to have been madeor unduly prolongs a case by "groundless contentions".5[10] MAXRaft has calculated costs on a 2B basis at $27,004, which comprises$16,249 for the proceeding and $10,755 for the interlocutory application. Havingreviewed the schedule attached to Mr Gillies' submissions, I am satisfied the 2B costscalculation is accurate.[11] Again, it is implicit from the Trust not filing a costs memorandum within the10 working days that the Trust was prepared to accept costs on a 2B basis plusdisbursements.3 Baker v Waimakuku Whanau Trust Board Inc HC Napier CIV-2010-441-581, 13 October 2011.4 Jarden v Lumley General Insurance (NZ) Ltd [2018] NZCA 6.5 Bradbury v Westpac Banking Corp [2009] NZCA 234 [2009] 3 NZLR 400 at [29], citingHedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [11].[12] Mr Mackenzie, counsel for the plaintiffs, has taken issue with some aspects ofthe 2B costs calculation, in particular in relation to a 2B allowance being applied tosome of the memoranda filed. However, the reality is that with scale costs there aresome "unders and overs". I can understand Mr Mackenzie taking the opportunity tochallenge the scale costs claimed given he had to engage with MAXRaft's applicationfor increased costs. However, if costs are to be restricted to a 2B basis then I acceptthe calculation tendered by Mr Gillies as being the figure that should be adopted.[13] The real issue is whether there should be increased or indemnity costs.Indemnity costs[14] I do not accept this is a case for indemnity costs. Nothing about the conductof the proceeding by the plaintiffs or counsel meet the high threshold for such anaward.[15] That the second defendant was joined later on in the proceeding, in my view,is of no moment. Mr Gillies suggests there was something amounting to"collaboration" between the plaintiffs and the first defendant that led to the joinder ofthe second defendant.[16] However, I accept Mr Mackenzie's evidence that it was after the first defendantprovided details and factual evidence of the building company's dealings with thesecond defendant that the second defendant was joined. I see nothing inappropriate inthat.[17] A review of my judgment of 14 June 2021 might suggest that MAXRaftsomewhat "dodged a bullet" by having reached a full and final settlement with thebuilding contractor to whom it subcontracted before the cracking of the concrete floorbecame apparent. But it can equally be said MAXRaft reached that settlement inreliance on the contractual relationships that existed and was entitled to rely on it.Increased costs[18] Mr Gillies applies for increased costs on the basis that MAXRaft should neverhave been joined to the proceeding. In effect, Mr Gillies says MAXRaft's earliercorrespondence with the plaintiffs' solicitors (raising arguments which I lateraccepted) justifies an uplift in costs as it means that, despite being made aware of thedifficulties they faced, the plaintiffs pursued an argument that lacked merit, or theyfailed to accept those arguments and drop their claim which amounted to anunreasonable refusal to accept an offer of settlement.[19] As to the last item, I accept Mr Mackenzie's submission that the Court doesnot place great weight on a "drop hands" offer.[20] I do not accept the plaintiffs pursued an argument that lacked merit. That mayseem somewhat counterintuitive given the plaintiffs' claim was struck out for notdisclosing a reasonable cause of action, but the plaintiffs' position was supported byauthority and appropriate submissions of counsel.[21] This is not a case where the plaintiffs ignored the arguments raised by thedefendants in support of the case that no duty of care arose, rather that the plaintiffssought to confront and answer those arguments by reference to authority. Again, itdoes not follow from the fact that I did not accept those points that the plaintiffs'position warrants an uplift on costs.Disbursements[22] The plaintiffs object to travel and accommodation costs for counsel. I considerthe travel and accommodation costs are appropriately claimed. There would be noreal costs-saving in an agent getting up to speed with the involved issues in this case.The amounts claimed are reasonable.[23] Accordingly, I approve the disbursements claimed by the second defendant.Timing of costs[24] The plaintiffs have appealed the strike out judgment. In the normal course thecosts of the strike out proceeding are fixed and payable now.Costs on the costs application[25] I award no costs in relation to the fixing of costs. The plaintiffs have by andlarge been successful in resisting the defendants' application for an uplift on costsalbeit that I did not accept the "line by line" analysis of scale costs proposed byMr Mackenzie.[26] Accordingly, there is an award of costs in favour of the second defendant,MBSS Ltd, in terms of Schedule A to the memorandum of counsel for the seconddefendant dated 28 June 2021, along with the disbursements set out in that Schedule._______________________________Associate Judge LesterSolicitors:Trollope & Associates, ChristchurchHesketh Henry, AucklandWhite Fox & Jones, ChristchurchCopy to counsel:T J Mackenzie, Barrister, Canterbury Chambers, Christchurch