RAPANA V MCBRIDE STREET CARS LTD HC DUN CIV 2007-412-118

RAPANA V MCBRIDE STREET CARS LTD HC DUN CIV 2007-412-118 1 May 2007IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY CIV 2007-412-118UNDER The District Courts Act 1947 IN THE MATTER OF an appeal pursuant to Section 72 of that Act BETWEEN TUI JOY MARIA RAPANA Appellant AND MCBRIDE STREET CARS LTD Respondent Hearing: 1 May 2007 (Heard at Dunedin) Appearances: DP Robinson for Appellant LA Anderson for Respondent Judgment: 1 May 2007ORAL JUDGMENT OF ASHER JSolicitors: Gallaway Cook Allan, PO Box 143 Dunedin John Milne, Barrister & Solicitor, PO Box 933 Dunedin[1] In a decision delivered on 22 January 2007 in the District Court at Dunedin, costs of $13,682.50 and disbursements of $6,543.50 were awarded in favour of the plaintiff and respondent, McBride Street Cars Ltd ("McBride") against the first defendant and appellant in these proceedings, Ms T Rapana. [2] That decision was made following a four-day hearing in the District Court in which McBride had obtained judgment against Ms Rapana for $500, and a successful appeal by McBride to the High Court in which a further $1,500 was awarded in McBride's favour. [3] In his decision the Judge ordered costs in favour of McBride. He applied the District Court scale on a 2B basis, applying the new 2005 District Court scale. He declined to take into account a Calderbank offer made on behalf of Ms Rapana to McBride on 2 November 2004. He also refused to adopt submissions made on behalf of Ms Rapana, which would have led to a reduction in the costs award on the basis of costs considerations that applied to other parties in the proceedings. [4] In this Court Mr Robinson in his careful submissions raises four particular points on appeal, two of which relate to the Calderbank offer and two of which relate to the Judge's general discretion. I will combine the two Calderbank points in a general consideration of the Calderbank offer. I will consider the two discretion points under a general heading.The approach to the appeal[5] This is an appeal against the exercise of a discretion. The appellant must show that the Judge in exercising his power to grant costs was "acting on a wrong principle or failed to take into account a relevant matter or took into account an irrelevant matter or was plainly wrong": May v May (1982) 1 NZFLR 165, 170; Alex Harvey Industries Limited v Commissioner of Inland Revenue (2001) 15 PRNZ 361 at 364. It was said in Thoroughbred & Classic Car Owners' Club Incorporated v Coleman & Anor CA203/93 25 November 1993 at 2, quoted in Otago Station Estates Ltd v Parker CA29/016 24 August 2006:It is unusual for an appeal to be brought to this Court on costs only and only rarely could an appeal succeed in that field for this Court is always especially reluctant to disturb a decision of a High Court Judge on a matter as discretionary as that of costs.These remarks apply equally to an appeal against a District Court Judge's decision to this Court. [6] There is particular need for an appeal Court to take a robust approach on a costs appeal. While costs generally will follow the event and be awarded to the successful party, the discretion to grant such costs is very broad and unfettered, and involves the application by the trial Judge of all the knowledge of the case acquired during the hearing. Given the myriad of considerations that may be relevant to costs, especially after a hearing of some length where evidence has been called, it cannot be expected that the trial Judge will fully review the case and refer to all relevant matters in giving what is usually a short costs decision. This is one of the reasons why there is now in place a simple scale. [7] The appeal Court is ill-equipped to immerse itself in all the details known to the trial Judge, and will be reluctant to disturb any decision in the absence of a very clear and significant error.The Calderbank offer[8] These proceedings were initiated in early 2003. There were in fact three sets of proceedings that were issued. I do not propose detailing each but there were effectively two plaintiffs, being the present respondent McBride and its principal Mr NB Cottle, and three defendants, Ms T Rapana a bailiff, the Attorney-General for the New Zealand Police and Reilly's Towage & Salvage 2002 Ltd. The case concerned the alleged trespass on the McBride's property and unlawful arrest/false imprisonment of Mr Cottle. Mr Anderson who appears for McBride today, acted for both McBride and Mr Cottle. [9] After the filing of the statement of claim there were a number of judicial conferences, the processes of discovery and inspection and the delivery of interrogatories were followed. There was an opposed application filed byMs Rapana. Prior to November 2004 briefs of evidence were prepared and served on behalf of McBride. [10] On 2 November 2004 a letter was sent marked "Without Prejudice Save As To Costs" by Ms Rapana's solicitors to Mr Anderson. The body of the letter read as follows:We are instructed to forward a settlement offer in respect of the First Defendant. The sum of $5,000.00 (inclusive of GST if any) is offered in full and final settlement of all matters arising between your clients and the First Defendant. The offer of settlement is made with a denial of liability and the existence of and terms of the settlement are confidential to the parties and their advisers. This offer will not be binding until McBride Street Cars Limited has executed a settlement deed. The offer is necessarily conditional upon the Court granting leave for the Plaintiff to discontinue against the First Defendant (in the event that the offer is accepted).[11] It was argued by Mr Robinson for Ms Rapana before the District Court Judge that this was a valid Calderbank offer and that since the amount substantially exceeded the $2,000 ultimately awarded to McBride against Ms Rapana, costs in fact should be awarded against McBride in favour of Ms Rapana or alternatively costs should lie where they fall. The District Court Judge rejected this argument and that decision is challenged in this appeal. [12] There were also other issues raised in relation to a later alleged Calderbankletter, but the Judge's decision in that respect is not challenged here.The discretion in relation Calderbank offers in November 2004[13] Mr Anderson pointed out that in November 2004 the current rule 47G, which directs that written offers without prejudice except as to costs may be taken into account in the District Court, was not in force. He submits that for that reason alone the Calderbank offer did not need to be taken into account by the District Court Judge.[14] This argument does not appear to have been accepted at the District Court. The Calderbank offer was considered on its merits. I accept that there is some authority for the proposition that until the present cost Rules were enacted in the District Court and High Court, Calderbank letters were not allowed to subvert the rules relating to payment into Court: Andrews v Parceline Express Limited (1994) 7 PRNZ 712. However, I consider that it was entirely within the Judge's discretion to take any 2004 Calderbank offer into account. By 2004 Calderbank offers had been expressly recognised in the High Court Rules. They had been recognised in a number of decisions in New Zealand, even before the enactment of the High CourtCalderbank rule. In 2004 it was reasonable for a party to send a Calderbank letter expecting it to be given some recognition by the District Court, subject to the Court's overall discretion on costs. Therefore, I do not consider that the Calderbank offer in question, if it is to be taken into account, should be put to one side because it was sent prior to the enactment of r 47G and 47H of the District Court Rules.What was McBride's entitlement to costs at the time of the offer?[15] The essence of a Calderbank offer as expressed in the original case (Calderbank v Calderbank [1975] 3 All ER 333), and by r 47H(4) and (5) is that if a party makes an offer that turns out to be more beneficial than the judgment ultimately achieved by the party who receives the offer, the offeror party may claim costs as if it has been successful in the litigation. It is, therefore, necessary, when a party seeks to rely on a Calderbank offer, to determine the value or benefit of the likely judgment to which the offeree party was entitled at the time of the offer. In doing so it is necessary to consider not only the value of the ultimate judgment. It is also necessary to take into account any costs entitlement of the successful party at the time the offer was made. [16] The amount recovered in the proceedings is, of course, a known factor. The entitlement to costs at the time the offer was made is not. It is something in respect of which there is not going to be any Court order, because the actual Court hearing would have taken place at a time after the offer. Some sort of an estimate of entitlement to costs must be made by the Court considering the value of theCalderbank offer.[17] In this case there was a calculation made by Mr Anderson in the District Court as to the costs entitlement of McBride at the time the offer was made on 2 November 2006, giving a total of $6,500. The calculation was as follows: (a) Preparation of claim 2 days @ $650 $1,300.00 (b) Memorandum for judicial conference: 27 August 2003 0.4 day $260.00 (c) Judicial conferences: 11 June 2003 27 August 2003 29 October 2003 12 December 2003 0.3 day 0.3 day 0.3 day 0.3 day $195.00 $195.00 $195.00 $195.00 (d) List of documents 1 day $650.00 (e) Production of documents 0.75 day $487.50 (f) Inspection of documents 1 day $650.00 (g) Notice to answer interrogatories 1 day $650.00 (h) Notice of opposition in respect of First Defendant's application to have First Defendants substituted (subsequently withdrawn by First Defendant) 0.4 day $260.00 (i) Preparation of briefs of evidence (calculated as if case did not proceed as briefs provided prior to 2 November 2004) 2.25 days $1,462.50TOTAL $6,500.00[18] It is also to be noted that if an allowance was made for disbursements the costs entitlement as at 2 November 2006 would have been greater again than $6,500. [19] If this is the correct entitlement then the argument for the appellant on theCalderbank offer must fail. This is because the Calderbank offer of $5,000 was less than the combined value of the judgment ($2,000) and costs entitlement ($6,500 plus disbursements), being at least $8,500. The District Court Judge in his Judgment does not do an express calculation of the costs entitlement on 2 November 2004. However, it appears to be implicit in his Judgment that McBride's entitlement tojudgment and costs at the time of the 2 November 2004 letter did exceed theCalderbank offer that was made. [20] Mr Robinson in his submissions challenged such an assumption. He went through the list of costs making the point that Mr Anderson, who claimed the costs, was at the time acting not only for McBride, but also for Mr Cottle. He also made the point that there were three defendants not just one involved in relation to all matters, and submitted that there was an element of injustice in holding Ms Rapana liable for all these costs. [21] However, on an overview I am satisfied that McBride, at the very least, was entitled to a good portion of the $6,500 as at 2 November 2004. Mr Anderson correctly submitted that at least $3,717.50 worth of the costs were specifically related to the McBride claim against Ms Rapana. Even if there was some portion of the balance deleted, the costs entitlement would exceed $5,000. For that reason alone the Judge was entitled to put to one side the Calderbank offer in assessing costs.Conditional nature of the offer[22] The Calderbank offer was made with a denial of liability and on condition that the existence of the settlement and its terms would be confidential to the parties and their advisers. The District Court Judge noted, "In my view, the conditional nature of the offer precluded it from being a true Calderbank offer". It was not simply an offer of $5,000. It was an offer of $5,000 together with some further terms, one of which, the confidentiality clause, was significant and possibly onerous. It would be quite understandable that a party might want to publicise a settlement. This is particularly so in a case such as this, which apparently involved issues of misuse of powers. A party wishing to have the benefit of a Calderbank offer should make a monetary offer without significant conditional terms. [23] The appellant has observed that the Crown might well not have insisted on the confidentiality stipulation in a subsequent negotiation. However, this observation does not resolve the problem. Of course, any stipulation including themonetary offer in a Calderbank offer can be the subject of further negotiation. The basis upon which Calderbank offers are approached is that they stand alone, and the Court will not speculate as to what reasonable negotiations might follow. [24] For this further reason the Calderbank offer cannot be seen as a more generous proposal than McBride's entitlement at the time. McBride was entitled at all times to a public judgment or outcome. Ms Rapana was seeking to impose a term to thwart this, and which she did not achieve, namely confidentiality.The public nature of the proceedings[25] The learned Judge referred to the fact that the case concerned a misuse of powers by a public official. He observed that if the offers had been accepted the whole matter might have been swept under the carpet, and that in his view that "would not have been right". He observed at [39]:Therefore, nice arguments about what is or is not (and what was or was not) a Calderbank offer, fall to the wayside in the face of the public interest fundamental, peculiar to this case, which I have just noted.[26] The Judge's apparent reliance on public interest as being a reason to refuse to take into account the Calderbank offer was criticised by Mr Robinson for the Crown. He submitted that if public bodies were not able to make and rely on Calderbankoffers, that would be a most unfortunate precedent. Mr Anderson in response submitted that the Judge was doing no more than taking into account the nature of the wrongdoing in exercising his discretion to take into account a Calderbank offer. He noted that on no less than three occasions in r 47G and 47H, it is made clear that the ability to take into account a Calderbank offer is discretionary. He pointed to the general discretionary nature of costs orders, and the fact that on occasions indemnity costs as distinct from scale costs may be considered as appropriate where there have been human rights infringements. In this regard he relied in particular on Attorney- General v Udompun [2005] 3 NZLR 245 at [186]. [27] In considering these conflicting submissions it is helpful to refer to the observations of the Court of Appeal in Moore v McNabb [2006] PRNZ 127. Litigation is today a costly exercise. It is in the interests of all parties that there areprocesses in place that will facilitate settlement, and, if settlement is not possible, limit the risk of costs. As was stated in Moore v McNabb at [58]:In summary, it is a requirement of fairness that litigants — particularly defendants — have some economic means of limiting their exposure to the risk of costs; and secondly the Court itself must ensure that a procedure of this character operates as an effective encouragement to settle.[28] These considerations do not cease to apply simply because the Crown is involved. In this case the proceedings were for damages only. No other form of relief was sought. It was the sort of context in which any party, including the Crown, could have some expectation that weight would be given to a Calderbankoffer. The fact that there may be elements of public interest in a case does not preclude an effective Calderbank offer. It will be for the Court to decide what weight to place on it. [29] Given the discretionary nature of the Court's consideration of Calderbankoffers, it is not possible to state any principle in this area, and I do not think that the District Court Judge was endeavouring to do so. His observations, as he noted, were "purely to this case". [30] I would have had concerns if the "public interest" factor was the sole basis for the Judge's rejection of the Calderbank offer. There were, however, as I have already stated, two other very good reasons to put that Calderbank offer to one side. In all the circumstances, I do not consider that the Judge's observations about the public interest factor mean that he was in error in his ultimate decision not to give the respondent a credit when awarding costs. I consider that his decision is correct for the two reasons earlier mentioned.Conclusion on Calderbank offer[31] I consider it was open to the Judge in his discretion to reject the Calderbankoffer as relevant to costs for the reasons that I have set out. I do not accept that he erred in his consideration of the Calderbank letter. The two points on appeal that related to that offer, therefore, do not succeed.Other discretionary factors[32] It was submitted that the learned District Court Judge erred in failing to have regard for the fact that McBride failed in its principal cause of action, being the economic tort alleged against the appellant and the Police jointly. This argument appears not to have been specifically raised before the District Court Judge. He was, however, aware of the causes of action that had succeeded and failed. In fact it appears that the economic tort allegation did not involve any extra evidence over the four-day period. It did involve some particular submission time in the half-day that was taken up with the presentation of argument. [33] Rule 47D(d) of the District Court Rules states that the Court may refuse to make an order for costs or reduce the costs otherwise payable if:Although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue that significantly increased the costs of the party opposing costs.This is a discretionary factor and it is to be noted that it applies to "significant" increases in costs. [34] It was well within the Judge's discretion to conclude that there had been no significant increases in costs in relation to the economic tort claim. I do not consider this to be an appropriate basis for interfering with his discretion. [35] It was also submitted that there was a failure to have regard to the effect of a settlement between the Attorney-General for the Police and McBride as to costs. I received some quite detailed submissions on this point. However, in the end it is clear from the Judgment that the Judge was aware of this submission, considered it, and in the end made no adjustment for it. I consider this to have been a matter entirely within his discretion, and it has not been shown that there was any error of principle made when he considered the matter. For that reason this ground of appeal cannot succeed.General conclusion[36] The costs ordered in this case were modest. The award of $13,682.50 was less than the actual costs of McBride. There could be no argument on the issue of disbursements. The amount awarded was on the basis of the relatively modest 2B scale and it is to be noted that that scale has increased substantially since 2004. [37] It was, for the reasons given, entirely within the Judge's discretion to put to one side the Calderbank offer in calculating those costs. [38] For these reasons the appeal is dismissed.Costs[39] Costs are awarded to the respondent on a 2B scale, on the basis of the Court sitting for three-quarters of a day... Asher J