JOHNSON v BARRY PARK INVESTMENTS LIMITED [2019] NZHC 1213

JOHNSON v BARRY PARK INVESTMENTS LIMITED [2019] NZHC 1213 [31 May 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2018-404-455[2019] NZHC 1213IN THE MATTER OF an application under section 323 of theProperty Law Act 2007BETWEEN XANTHE ANNA JOHNSON AND MARKANDREW GRAHAMPlaintiffsAND BARRY PARK INVESTMENTS LIMITEDDefendantHearing: On the papersCounsel: K Quinn and C Pearce for the PlaintiffsG J Kohler QC and S J Neville for the DefendantJudgment: 31 May 2019COSTS JUDGMENT OF MUIR JThis judgment was delivered by me on Friday 31 May 2019 at 11.30 ampursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:Counsel:K Quinn Barrister, AucklandC Pearce, Barrister, AucklandG Kohler QC, Barrister, AucklandSolicitors:Heimsath Alexander, AucklandEllis Gould, AucklandIntroduction[1] In my judgment dated 27 March 2019, I stated that the plaintiffs were entitledto costs and provisionally indicated that I considered these appropriately assessed ona 2B basis. I further indicated that it was my expectation quantum could be settled bythe parties. Regrettably, this has not been the case and a further judgment is thereforerequired.[2] Neither party takes issue with my provisional 2B categorisation. The areas ofdispute relate largely to:(a) the incidence of costs on the plaintiffs' withdrawn application for leaveto commence by way of originating application;(b) whether there should be an uplift to or deduction from the plaintiffs'base line entitlement; and(c) what disbursements are recoverable, particularly in relation to experts.The application for leave[3] Initially, the plaintiffs sought to commence their proceedings by way oforiginating application. They applied for leave accordingly. To provide context to theleave application they simultaneously filed their substantive evidence (includingexpert evidence).[4] The application was opposed by the defendant and heard by me. The principalground of opposition, reflected in paragraph [6] of my Minute dated 15 February 2018,was that the defendant intended to file a counterclaim to advance rights of naturalsupport for the defendant's house. Mr Kohler QC submitted that this could not bedealt with efficiently in the context of a claim against the defendant, which had beenbrought under Part 19 of the High Court Rules.[5] During the course of exchanges with counsel, Mr Kohler persuaded me that,despite my initial assessment that the Part 19 procedure might provide a satisfactoryvehicle for disposition of the dispute, the prospect of such counterclaim significantlyundermined the utility of that approach. It appeared to me that the Court would likelybe faced with parallel ordinary proceedings at the behest of the defendant and anapplication to consolidate such proceedings with the plaintiffs' originating application.If that were the case I could see little advantage in the whole dispute not movingforward as an ordinary proceeding.[6] I discussed these provisional views at length with counsel during the course ofthe hearing. I advised that I thought the case could benefit from intensive casemanagement and assignment to a Judge. I sought assignment in my own favour fromthe Chief High Court Judge and advised the parties after the lunch adjournment thatthis had been approved. I further indicated that I did not consider the plaintiffs shouldhave to start again and that the matter could progress with statements of claim, defenceand counterclaim.[7] On that basis, the plaintiffs indicated that they did not resist orders decliningleave to proceed by way of originating application, while opposing any application forcosts in respect of the steps taken up to that point.[8] I reserved costs on the basis that I could not then say the plaintiffs' applicationhad been ill-conceived at the time of filing, and that I considered my assessment wouldbenefit from a better understanding of the full factual matrix, which I could only beexpected to have at a later point in the proceeding.[9] Both parties now seek costs in respect of the application for leave. In thealternative, the plaintiffs say that costs should lie where they fall. The plaintiffs' scaleclaim is $12,990. The defendant's scale claim is $10,926.[10] In my view, costs should lie where they fall. Although the fact the applicationfor leave was dismissed might ordinarily be thought to support a claim by thesuccessful respondent,1 I take into account the fact that, despite the fact a counterclaimwas filed and prosecuted through to trial, it was abandoned in final submissions. Hadthat decision been made at the outset, I consider that the matter could have proceeded1 High Court Rules 2016, r 14.2(1)(a).under Part 19 after all, at least with reasonable co-operation between counsel ondiscovery issues. I regard that as a sufficient "other reason" within the terms of Rule14.7(g) to decline a costs award in the defendant's favour. By the same token, anaward in favour of the plaintiffs would breach the most fundamental tenant of anycosts assessment – that "the loser and only the loser pays",2 unless there areexceptional reasons. I do not consider the reasons in this case sufficiently exceptional.I note the sensible concession in open correspondence from the plaintiffs' counsel thatin the interests of agreeing costs, those on the interlocutory application should liewhere they fall. In the event, no agreement was possible, but his position accuratelyforeshadows my own.Increased/decreased costs[11] Although in their attempts to resolve costs the plaintiffs did not seek an uplifton scale costs (and indeed proposed an approximately $20,000 discount for promptsettlement of the quantum), they reserved their right to seek increased costs in theabsence of agreement.[12] No agreement having been reached, they now seek an uplift of 25 per cent.They do so for the following reasons:(a) The matter was not as complex as the defendant had foreshadowed andcould have proceeded under the Part 19 procedure.(b) The "detailed historic searching" that the defendant insisted wasnecessary, and on which it further relied to oppose the application forleave, achieved no useful result.(c) The defendant's interrogatories were irrelevant, and the plaintiffs'answers to them neither referred to in opening nor closing.(d) The counterclaim was not pursued at trial, but in the meantime theplaintiffs were required to answer it.2 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].(e) The defendant refused even to admit an encroachment until the eve oftrial, requiring the plaintiffs to produce detailed survey evidence.(f) The defendant challenged the feasibility of removing the wall, claiming"detailed engineering evidence [would] particularly be required", butthen chose not to call any evidence in that respect.(g) Mr Burton attempted to mislead the Court as to his financial means onat least six occasions in his signed (and read) brief of evidence, bycasting himself as someone facing financial hardship and who wouldbe seriously embarrassed by any exercise of the Court's discretion torequire removal or reconstruction of the wall. As a result, extensiveresearch and cross-examination was necessary to reveal the trueposition.[13] Cumulatively, I consider that these factors do justify an uplift under Rule14.6(3)(b)(ii), (b)(iii) and (c). In particular, Mr Burton's attempts to portray himselfas someone who – on account of his financial circumstances – should be thebeneficiary of the Court's discretion were significantly misleading. As the cross-examination demonstrated, he is, despite the somewhat eccentric circumstances inwhich he chooses to live, a multi-millionaire. The trial was unnecessarily extended tocorrect the impression he chose to create and I have no doubt that extensivebackground research was required to undertake what was an effective cross-examination in this respect.[14] The very late concession in relation to the encroachment and the prosecutionof a counterclaim that was ultimately abandoned also weigh significantly in myassessment. I am left in no doubt that Mr Burton chose to pursue an approach to theproceedings which was designed to increase cost and difficulty from the plaintiffs'perspective. Steps were taken that lacked merit and sensible concessions (as in respectof the encroachment) came too late.[15] I consider the claim for a 25 per cent uplift reasonable and allow it.[16] However, against that I must take into account the defendant's legitimateargument that, although the plaintiffs succeeded overall, they were unsuccessful inpersuading me (at least at this stage) that an order should be made compelling thedefendant to remove and reconstruct the wall in accordance with the methodology oftheir expert, Mr Wood. Rather, I considered the appropriate course was to order workseither in accordance with that methodology, or any alternative methodology approvedby structural and geotechnical engineers engaged by the defendant and tabled with theCourt. In so doing, I recognised a range of possible solutions open to the defendantwhich could potentially be very much cheaper than the +$400,000 works proposed byMr Wood.[17] In the result, although relief was ordered in terms of paragraphs A and B of theplaintiffs' principal cause of action, I declined relief in terms of paragraphs C and D.[18] I accept Mr Kohler's submission that one of the significant focuses in the casewas the nature of the relief which should be granted in the event the wall was foundto be a wrongly placed structure, and I accept that, by analogy with cases whereallowance has been made for prosecution of unsuccessful causes of action, someadjustment of the costs order is appropriate on this account. Indeed, Rule 14.7(d)specifically recognises as grounds for abatement of a costs order "failure in relation toa cause of action or issue" which significantly increased costs.[19] I consider an allowance of 15 per cent appropriate in this respect. In the result,I allow a net uplift of 10 per cent.Experts' costs[20] The plaintiffs claim experts' costs of $54,714. This figure is broken down intotwo components, being (1) costs associated with the trial of $49,506 and (2) a sum of$5,208, which is 50 per cent of the experts' costs incurred in 2017 when the initialapplication for leave was filed.[21] In respect of the 2017 costs, I accept the plaintiffs' submission that the workwas far from wasted. It formed the nucleus of the evidence at trial, even though in thecase of Mr Wood it was necessary for him to refine his predecessor Mr Thomas'methodology. Again responsibly, the plaintiffs concede that some duplication wouldinevitably have occurred. That is why they propose a 50 per cent discount. I acceptthat this represents an appropriate exercise of the discretion contained in Rule 14.12(3)in respect of an otherwise meritorious disbursement claim.[22] In respect of the experts' trial costs, I have reviewed the detailed timesheetsand invoices of the five experts involved.3 I consider the accounts demonstrablyreasonable in the context of a one-week trial which raised issues of considerablecomplexity from an engineering, town planning and quantity surveyor perspective.4[23] The defendant argues that the evidence of Messrs Wood and Ranum was not"reasonably necessary for the conduct of the proceedings" within the terms of Rule14.12(2)(c) and should therefore be disallowed. Mr Wood prepared the detailedmethodology of wall removal and reconstruction which (at this stage) the Court hasnot mandated, Mr Ranum costed the same.[24] I do not regard the costs of these witnesses as having been unreasonablyincurred in the context of the proceedings. One of the defendant's significant groundsof defence was that removal of the wall could not be safely done. Mr Wood's evidencewas, I accept, necessary to demonstrate that the work was feasible and safe. Moreover,although my judgment gave the defendant the option of developing othermethodologies, in the absence of such, the direction is to undertake the work inaccordance generally with the methodology developed by Mr Wood. Mr Wood'sapproach is therefore effectively the default one. And, in respect of Mr Ranum, Iaccept the plaintiffs' submission that because the ultimate remedy was always goingto be discretionary, the costs of removal and reinstatement were matters necessarilybefore the Court.53 Mr Ranum did not prepare and retain time sheets, instead maintaining a running tally of hoursspent, which was then disposed of when the invoice was sent.4 That conclusion relates to both scope of attendances (Rule 14.12(2)(c)) and amount charged (Rule14.12(2)(d)).5 As Mr Quinn submits, if the costs of removal had, for example, been totally disproportionate tobenefit, the Court may have been persuaded to order damages in lieu.Other disbursements[25] The defendant challenges an invoice of $559 for the LawFlow 3-discoveryplatform. It says that there was a modest number of discoverable documents(approximately 200) and that because of other allowances for discovery it is not aproper, necessary or appropriate disbursement. I do not agree. The use of an electronicplatform to manage discovery is now routine and I accept will have saved counselseveral hours in collating documents, preparing discovery lists and trial bundles. Iallow the disbursement.[26] Consistent with my previous conclusions, I do not allow for a filing fee on theoriginating application and interlocutory application for leave.Second counsel[27] I certify for second counsel. This was a moderately complex claim where bothparties were represented by two counsel and the defendant by a Queens Counsel. Theplaintiffs' submissions were detailed, extensive and significantly assisted in thepreparation of my judgment. I have no doubt their quality reflected the combinedinput of counsel.Costs on preparation of costs submissions[28] The plaintiffs seek costs on preparation of their costs submissions by analogywith item 24 of Schedule 3 ($3,445). They further seek an uplift on that or an orderfor indemnity costs if the final award of costs is "materially more" than the $125,000(all in) which they offered to settle costs for. As it is, my ultimate award exceeds$125,000 but not by a significant amount (approximately 5 per cent).[29] I consider an award of costs by analogy with item 24 appropriate. However, Idiscount the amount claimed by 50 per cent to reflect late provision by the plaintiffsof their experts' time sheets. Rule 14.12(2) refers to verified disbursements andalthough I have found the accounts (1) identify attendances reasonably necessary forthe conduct of the proceedings and (2) reasonable in amount, verification was alegitimate request. However, in view of the number of differences between the parties,I consider it most unlikely that timely provision would have resulted in settlement. Ialso have no doubt that the solicitor/client costs involved in preparation of theplaintiffs' submissions will have been appreciably higher than the 50 per centallowance I make.Result[30] I award costs and disbursements in favour of the plaintiffs and against thedefendant in the total amount of $133,716.70 calculated in accordance with theSchedule annexed hereto.__________________________Muir JScheduleCosts – Main Proceeding Allocation(Band B)Amount$Commencement1 Commencement of proceeding by plaintiff 3 6,690.00Other pleadings and notices3 Reply 0.8 1,784.00Case Management10 Preparation for first case management conference 0.4 892.0011 Filing memorandum for case management conference 0.4 892.0013 Appearance at case management conference (2 May 2018) 0.3 669.00Interrogatories, discovery and inspection17 Answer to interrogatories 1 2,230.0020 List of documents on discovery 2.5 5,575.0021 Inspection of documents 1.5 3,345.00Trial preparation and appearance30 Plaintiffs' preparation of briefs 2.5 5,575.0031 Plaintiffs' preparation of list of issues, authorities, andcommon bundle 2.5 5,575.0033 Preparation for hearing 3 6,690.0034 Appearance at trial by principal counsel (5 days) 5 11,150.0035 Appearance by second counsel (5 days) 2.5 5,575.00Subtotal $56,642.00Plus 10% upliftPlus costs allowance on costs submissionsSubtotalGeneral Disbursements$ 5,664.20$ 1,722.50$64,028.70Process server fee 155.00Filing fee – statement of claim 1,350.00Filing fee – defence to counterclaim 110.00Scheduling fee for trial 1,600.00Hearing fee for trial 11,200.00LawFlow e-discovery platform (19 May 2018-28 Feb 2019) 559.00Subtotal $14,974.00Experts2017 (less 50%) 5,208.00Trial experts 49,506.00Subtotal $54,714.00Grand Total $133,716.70