|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Court of Appeal of New Zealand |
Last Updated: 18 December 2011
IN THE COURT OF APPEAL OF NEW ZEALAND
CA43/05BETWEEN WAIRARAPA DISTRICT HEALTH
BOARD
Appellant
AND A J SHIRLEY
First Respondent
AND S G & M K
BENSEMANN
Second
Respondents
Hearing: 12 October 2005
Court: Robertson, Baragwanath and Heath JJ
Counsel: M G Ring QC for
Appellant
C J Hodson
QC and A L Credin for First Respondent
No appearance for Second Respondents
Judgment: 7 December 2005
|
JUDGMENT OF THE COURT
|
____________________________________________________________________
REASONS
Robertson J (dissenting) [1]
Baragwanath J [36]
Heath J [62]
ROBERTSON J
Introduction
[1] The Wairarapa District Health Board (the Board) appeals from a costs decision of Miller J delivered in the High Court at Wellington on 9 March 2005. The Judge awarded Mr Shirley 30% of costs on a 2B basis against the Board relating to his successfully defending a claim that he had given negligent advice to Mr and Mrs Bensemann, the second respondents.
Factual and procedural history
[2] In 1998 Mr Bensemann had a vasectomy. It was performed by Mr Shirley, a surgeon employed by the Board. Notwithstanding the operation, in 2000 Mrs Bensemann gave birth to a son.
[3] As a result, the Bensemanns instituted proceedings against the Board. They did not allege that the operation had been performed negligently, but proceeded on the basis that Mr Shirley had not fully informed them of the risk of recanalisation within 10-12 years. The Bensemanns contended that if they had known of the risk, they would not have proceeded with the vasectomy.
[4] The Board sought to settle the claim in order to avoid the costs of litigation. After an attempt at mediation failed, the Board initiated an alternative strategy. It persuaded the Bensemanns to join Mr Shirley as a second defendant and the Board cross-claimed against him. The purpose of this arrangement was to pressure Mr Shirley into contributing to a global settlement of the case, or, if that failed, to settle separately with the Bensemanns. When Mr Shirley refused to contribute to a global settlement, the Board made an offer of settlement of $20,000 to the Bensemanns which they accepted. In August 2003 the Bensemanns discontinued the claim against the Board. The claim against Mr Shirley continued.
[5] Following a full hearing, in a decision delivered on 15 July 2004, Miller J dismissed the Bensemanns’ action against Mr Shirley.
[6] On 28 October 2004 Mr Shirley brought an application seeking an order that the Board, as a former defendant, contribute to the costs he incurred in defending the claim.
The decision of Miller J
[7] The Judge first considered the jurisdiction to make the order. He noted that counsel had agreed that he had jurisdiction, but that it had to be exercised in a principled way. He cited the following High Court Rules:
[46 Costs at discretion of Court
(1) All matters relating to the costs of and incidental to a proceeding or a step in a proceeding are at the discretion of the Court.
(2) Rules 47 to 48G apply subject to subclause (1).
...
[476A Effect of discontinuance
(1) A proceeding ends against a defendant or defendants, as the case may be, on—
(a) the filing and service of a notice of discontinuance under rule 475(1)(a); or
(b) the giving of oral advice of the discontinuance at the hearing under rule 475(1)(b); or
(c) the making of an order under rule 476.
(2) The discontinuance of a proceeding does not affect the determination of costs.
(3) This rule is subject to rule 476B.]
...
[476E Certain remedies not affected
If a plaintiff discontinues a proceeding in which a defendant has issued a third party notice under rules 154 to 162 or has filed a notice under rules 163 to 168, the discontinuance does not affect the continuation of the proceeding in relation to the third party notice or the notice filed under rules 163 to 168.]
[8] Secondly, the Judge noted the principle that the Court may award costs against a non-party who funds litigation and controls it or is to benefit from it, citing the recent Privy Council decision in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] 1 NZLR 145 at [25]. He stated that the rationale behind this principle is that it is wrong for someone to fund litigation in hope of a benefit without a corresponding risk of exposure to costs. While this did not exactly describe the position of the Board in this case, the Judge was satisfied that the jurisdiction under r 46 extended to a former party against whom the proceeding has been discontinued, but whose conduct in the litigation has caused the applicant to incur costs.
[9] At [31] the Judge said:
In Dymock, the Privy Council assumed ... that causation must be shown in a claim for costs against a non-party. I have found the Board is a party for the purposes of this application, but I accept that causation is necessary on the facts of this case. The Board was entitled to settle independently of Mr Shirley. It did so for the understandable reason that it wished to avoid costs and eliminate trial risk. Settlement is to be encouraged. In such circumstances, there could be no justification for an award of costs subsequently incurred, in the absence of either a right to indemnity or some conduct on the Board’s part that caused Mr Shirley to incur costs that he otherwise would not have incurred.
[10] The Judge considered the evidence relevant to the question of causation, finding at [34] that the “connection between [the Board’s] conduct of the litigation and [Mr Shirley’s] costs is sufficiently direct to establish causation.”
[11] The following passage encapsulates the Judge’s reasoning for the exercise of his discretion:
[40] At the end of the day, the dominant consideration is that Mr Shirley was involved in the litigation only because of the Board’s decision to join him as a defendant to encourage him to contribute to the settlement. It chose to join him in that way to exert pressure on him. Had he been joined as a third party, he very likely would have avoided the costs he now claims since he would have benefited from any settlement between plaintiff and defendant. Alternatively, he would have been entitled to claim costs against the Board had it gone to trial. I attribute no fault to the Board, but neither do I see that it should avoid a contribution to costs resulting from its decision, merely because it settled before trial and he did not.
[41] I conclude that an award of costs is appropriate in the unusual circumstances of this case.
Submissions in this Court
[12] Mr Ring QC for the Board did not dispute that the Judge had jurisdiction to make the order. His complaint was that there was no principled basis for the exercise of discretion on these facts. He submitted the Judge erred in finding that the Board caused Mr Shirley to incur costs by urging the Bensemanns to join him in the litigation because:
(a) There was no evidence that, in the absence of the Board’s urging, the Bensemanns would not have joined Mr Shirley as a party, nor any evidence from which this inference could reasonably be drawn;
(b) Even if (a) is not accepted, causation alone is not a sufficient justification for an award of costs. There must be some other factor, such as that the respondent to the application was an unsuccessful party, misconducted itself and/or was the sole or substantially financial beneficiary of and/or substantially controlling the proceedings;
(c) Even if (a) and (b) are not accepted, the employment and insurance arrangements between the parties were relevant and the Judge should have taken them into account.
[13] Mr Ring did not challenge the quantum of the award if the Court found that an award was justified.
[14] Mr Hodson QC for Mr Shirley submitted that the appeal was against the exercise of an agreed and acknowledged discretion and that this Court should be slow to interfere with Miller J’s exercise of it given that he was best placed to assess the evidence. He also submitted that if the Court required some other factor such as funding or benefiting from the proceedings to be present, then these factors are satisfied in the unique factual circumstances.
Discussion
The role of the insurers
[15] There has been no secret of the fact that positioning as between indemnifiers has been at the heart of this protracted litigation. The Board’s insurers were anxious to obtain some contribution to a settlement with the Bensemanns from Mr Shirley’s insurer.
[16] The Judge had an affidavit from Jennifer Woodman, the National Claims Manager of QBE, the Board’s insurer. The following passage was reproduced by the Judge at [7] and explains candidly the reasons for the course of conduct undertaken by the Board:
After the meditation (sic), I remained keen to achieve a settlement of the claim, to avoid the costs of litigation, particularly as the Bensemanns were on legal aid. But my appointed solicitors, Duncan Cotterill were unable to generate any offer to contribute from MPS’s solicitors, Rainey Collins. Our appointed counsel, Michael Ring had a similar lack of success with MPS’s counsel, Christopher Hodson QC.
Because the Bensemanns’ only complaint against WDHB was that it was legally responsible for Dr Shirley’s alleged negligence towards them, and so WDHB could well be held liable solely because of his conduct, the obvious next step was to ensure that Mr Shirley was joined as a party to the legal proceedings, either as a third party joined by WDHB or as defendant joined by the Bensemanns.
In the end Duncan Cotterill persuaded the Bensemanns’ solicitors, Johnston Lawrence that they should join Dr Shirley as a second defendant, and WDHB cross claimed against him.
This still did not persuade MPS of the benefits of joining WDHB/QBE in a commercial settlement. So the logical alternative was for WDHB/QBE to attempt to deal separately with the Bensemanns. On 29 November 2002, Duncan Cotterill wrote to Johnston Lawrence, offering to pay $20,000 in full and final settlement of all claims by the Bensemanns against WDHB. The letter expressly left open the risk to be borne by WDHB that WDHB may be kept in the proceeding by a cross claim from Mr Shirley.
[17] The 29 November 2002 letter gives further insight into the reasons for dealing separately with the Bensemanns:
There are only two possible outcomes of any trial:
(1) The Bensemanns succeed against Dr Shirley. He is fully insured, quite apart from his own personal financial position. There is no real risk that the Bensemanns would be unable to collect on the judgment. In these circumstances, the claim against WDHB is redundant.
(2) The Bensemanns fail against Dr Shirley. The Bensemanns’ claim against WDHB relies exclusively on the conduct (error and/or omission in advice) by Mr Shirley. So a failure against Mr Shirley automatically means a simultaneous failure against WDHB.
Accordingly, whatever outcome, WDHB’s presence adds no benefit to the Bensemanns’ prospects of a successful recovery. Additionally, it would inevitably prolong the duration of the trial, because there will be additional cross-examination of all witnesses, and an extra opening and closing. This will also increase the cost of legal aid. Although that is not an immediate cost to them, they will ultimately have to pay because their legal costs will be deducted from any judgment received or be a charge on their property.
However, the most important factor for them in favour of settlement with WDHB is the effect that we believe this will have on Dr Shirley’s attitude. Counsel, Michael Ring, has been in similar situations. The doctor refused to make any contribution to settlement, and attempted to trade on the employer/employee relationship to force the Hospital to pay. The Hospital negotiated a partial settlement with the plaintiff in return for a discontinuance. Shortly afterwards, the doctor offered (usually for the first time) a realistic figure which led to a final settlement.
The clear impression was that, while the doctor was able to hide behind the Hospital as co-defendant, there was no interest in making any realistic settlement proposal. But, once exposed as the only party, the doctor’s insurer was willing to see sense. A strong factor in this is the inevitable publicity at any trial which would focus on the doctor alone, and would be highly damaging regardless of result.
The crux of the case
[18] There was no dispute over the Court’s jurisdiction to make the order, that being conceded by the Board.
[19] The only question is whether the decision that the Judge made was available as a principled exercise of his discretion. Under r 46 costs are discretionary. An appellate court should be slow to interfere with an exercise of discretion unless some error of principle can be demonstrated. It is not a case of an appellant persuading the Court of Appeal to substitute its assessment for that of the primary Judge, but demonstrating that the initial Judge (who was immersed in the case and all its ramifications) was clearly wrong.
The Dymocks case
[20] In Dymocks, Dymocks Franchise Systems (NSW) Pty Ltd had been a successful appellant before the Privy Council and obtained an award of costs made against the respondents, the Todds, who were bankrupt. Dymocks petitioned the Privy Council for costs against a non-party, Associated Industrial Finance Pty Ltd, which had financed the Todds’ litigation. The Privy Council granted relief.
[21] At [20], Lord Brown of Eaton-under-Heywood said:
Although the position may well be different when a number of non–parties act in concert, Their Lordships are content to assume for the purposes of this application that a non–party could not ordinarily be made liable for costs if those costs would in any event have been incurred even without such non–party’s involvement in the proceedings. On the facts of this case, however, Their Lordships conclude that, but for Associated’s involvement, the Todds would not have pursued their appeal to the Court of Appeal and thus occasioned the costs both in that Court and on the further appeal to the Privy Council.
[22] His Lordship summarised the principles to be applied in the exercise of discretion to award costs against non-parties at [25]. The following are relevant parts of that summary:
(1) Although costs orders against non–parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact–specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.
(2) Generally speaking the discretion will not be exercised against “pure funders”, described in para [40] of Hamilton v Al Fayed [[2002] 3 All ER 641; [2003] 2 WLR 128] as “those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course”. In their case the Court’s usual approach is to give priority to the public interest in the funded party getting access to justice over that of the successful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights.
(3) Where, however, the non–party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non–party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation, a concept repeatedly invoked throughout the jurisprudence – see, for example, the judgments of the High Court of Australia in Knight [v FP Special Assets Ltd (1992) [1992] HCA 28; 174 CLR 178; 107 ALR 585] and Millett LJ’s judgment in Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1997] 1 WLR 1613. Consistently with this approach, Phillips LJ described the non–party underwriters in TGA Chapman Ltd v Christopher [1998] 1 WLR 12 as “the defendants in all but name”. Nor, indeed, is it necessary that the non–party be “the only real party” to the litigation in the sense explained in Knight, provided that he is “a real party in . . . very important and critical respects” – see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, referred to in Kebaro [Pty Ltd v Saunders [2003] FCAFC 5] at pp 32 – 33, 35 and 37. Some reflection of this concept of “the real party” is to be found in CPR 25.13(1)(f) which allows a security for costs order to be made where “the claimant is acting as a nominal claimant”.
Causation
[23] In the present case Miller J found that causation was established:
[32] This is not a case in which the Board controlled the plaintiff’s action and hoped to benefit from it. The Board procured the plaintiffs to take a step – joining Mr Shirley – that the evidence suggests they would not otherwise have taken. I accept Mr Ring’s submission that the plaintiffs were also involved. Their counsel signed the consent memorandum and filed the amended statement of claim. But the evidence is clear that they joined Mr Shirley at the Board’s urging. But for the Board’s actions, the costs that are the subject of this application would not have been incurred.
[24] Mr Ring argued that this finding was not available to the Judge on the evidence and was mere speculation on the Judge’s part, in the absence of some evidence from or on behalf of the Bensemanns to this effect. I do not see this lack of evidence from the Bensemanns as decisive. The finding was a reasonable inference to be drawn from the totality of available evidence.
Exercise of Discretion
[25] The Judge did not specifically refer to r 47 which sets out principles applying to the determination of costs, but a recognition of them is implicit in the judgment. The first principle is that the party who fails with respect to a proceeding should pay the costs of the party who succeeds. As the Bensemanns were legally aided, this had minimal impact.
[26] Lord Brown of Eaton-under-Heywood in Dymocks, as recorded at [22], considered the position of non-parties. He enunciated the general principle and was thereafter concerned with specific types of non-parties, such as “pure funders” and “parties in all but name” within that general rubric. There is no suggestion that in this case the Board is in the same position as a “party in all but name”, such as Associated in the Dymocks litigation. Nor is it a “pure funder”.
[27] Nevertheless, the general principle remains. I am not satisfied that this is not one of those exceptional cases in which it was open to the Judge to award costs against a non-party. As Lord Brown emphasised in [25](1), “exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.” It was open to Miller J to apply this approach to the peculiar circumstances which had developed. This reasoning can apply to situations, such as the present, where costs have been incurred by one party as a direct result of the actions of a party against whom the proceedings were subsequently discontinued.
[28] I do not see the fact that the Board did not continue to be a party as a bar to this exercise of jurisdiction. We are dealing with the economic consequences of a step taken by the Board while it was a party.
[29] There was no need, as a matter of law to join Mr Shirley to the proceedings. The Board chose to initiate and encourage it happening before it settled with the Bensemanns with the clear intent of exerting pressure on Mr Shirley’s indemnifier. Faced with allegations of negligent advice, it was not surprising that Mr Shirley defended the proceedings in order to clear his name. Some suggestion was made that Mr Shirley should have brought a cross-claim against the Board in order that it remained a party to the proceedings. While no doubt this was a course open to the doctor, his failure to do so should not be held against him as such a step would only have served to even further increase legal costs. In my judgment it was not unreasonable that the Board, which orchestrated Mr Shirley’s direct involvement in the litigation, should be required to make a contribution to his legal costs.
[30] Rule 476A(2) provides that the discontinuance of a proceeding does not affect the determination of costs. When the Bensemanns discontinued their proceedings against the Board, it did not relieve the Board of the risk of liability for costs which it had helped to create in a material way.
[31] Mr Ring argued that it would be an unacceptable disincentive to settlement if a defendant who had settled was subject to a continuing risk of costs in a proceeding over which it no longer had control, simply because at an earlier stage it had joined another party. I do not accept this argument. The possibility has been acknowledged in s 476A(2) of the Rules. The circumstances in which it might apply will no doubt be limited. It is to be anticipated that the circumstances in which a party instigates the joining of another party into litigation without any substantial legal justification or benefit will be truly exceptional.
Other factors
[32] Mr Ring submitted that even if the finding of fact on causation was not overturned, it was insufficient to provide a basis for the award which was made. Something more, such as that the Board was an unsuccessful party, that it was guilty of misconduct, or that it would have been a substantial financial beneficiary of the Bensemanns’ success, he contended was necessary.
[33] In my judgment, that adds a gloss to the Rules and the principles in Dymocks which is neither necessary nor sustainable. Once causation is established, it is a matter for the discretion of the Judge in weighing up the various “fact-specific” considerations. The financial arrangements in Dymocks were seen as justifying an award of costs against Associated. In the present case, the Board’s conduct in having Mr Shirley joined was seen by the Judge as justifying an award against it, especially as there was no legal need or imperative for his involvement because of the contractual inter-relationship between the Board and Mr Shirley. Making him a party was driven by economic advantage and can equally have economic consequences.
Conclusion
[34] Miller J as the trial Judge was fully aware of all of the pre-trial events. He had jurisdiction to make the award and the exercise of his discretion is not shown to have been unavailable.
[35] While I would dismiss the appeal, for the reasons given by Baragwanath and Heath JJ, the appeal is allowed and the costs orders made in the High Court are quashed. There will be an award of $5,000 costs and usual disbursements to the Board in respect of the appeal.
BARAGWANATH J
Introduction
[36] The Wairarapa District Health Board (WDHB) was sued by the second respondents for losses said to arise from a failed vasectomy performed by the first respondent who was a surgeon employed by WDHB. At the instigation of the Board Mr and Mrs Bensemann joined Mr Shirley as a second defendant. The Board subsequently settled the claim against it by payment to the plaintiffs of $20,000. They pursued the claim against Mr Shirley and lost. Because they were in receipt of legal aid Mr Shirley could not recover costs from the plaintiffs. He therefore applied to the High Court to recover from the Board his party and party costs of successfully defending the action incurred after the Board had settled with the plaintiffs.
[37] The appeal is against the judgment of Miller J delivered on 9 March 2005 awarding Mr Shirley 30% of his scale costs and disbursements of $34,691.55. In my view the order cannot stand.
The facts
[38] The proceeding was launched against the Board alone although the principal issue was always whether Mr Shirley gave negligent advice about the risks of failure inherent in the operation. It is common ground that WDHB would be vicariously liable for any negligence by Mr Shirley and so there was no legal requirement for the plaintiffs to have joined Mr Shirley.
[39] While conventionally the involvement of underwriters is not disclosed to the Court, in the course of litigation of the costs claim affidavits were filed by Mr Shirley recording the involvement of his professional indemnifier, the Medical Protection Society (“MPS”), by Ms Woodman, the National Claims Manager for QBE Insurance (International) Ltd (“QBE”), the liability insurer of the WDHB and in reply an affidavit by Ms McLean, the General Manager of Hospital Services and also the Quality and Risk Manager for WDHB exhibiting the collective employment agreement with senior medical staff including Mr Shirley. I adopt the conventional approach that the issues are between the parties rather than their insurers.
[40] As the Judge found, the joinder of Mr Shirley was instigated by QBE which indeed made the application to which the plaintiffs consented. Ms Woodman deposed that WDHB applied unsuccessfully to strike out the claim on legal grounds. There followed an unsuccessful mediation. Ms Woodman remained keen to achieve a settlement to avoid the costs of litigation particularly as the plaintiffs were on legal aid. But attempts of QBE’s legal advisers to secure contribution from MPS were unsuccessful. Ms Woodman deposed:
3.4 Because the Bensemanns’ only complaint against WDHB was that it was legally responsible for Dr Shirley’s alleged negligence towards them, and so WDHB could well be held legally liable solely because of his conduct, the obvious next step was to ensure that Dr Shirley was joined as a party to the legal proceedings, either as a third party joined by WDHB or as defendant joined by the Bensemanns.
3.5 In the end, [QBE’s solicitors] persuaded the Bensemanns’ solicitors... that they should join Dr Shirley as a second defendant, and WDHB cross claimed against him.
...
4.1 This still did not persuade MPS of the benefits of joining with WDHB/QBE in a commercial settlement. So the logical alternative was for WDHB/QBE to attempt to deal separately with the Bensemanns...
[41] On 29 November 2002 the solicitors for WDHB wrote without prejudice except as to costs to the plaintiffs’ solicitors to invite the plaintiffs not to pursue the proceeding against WDHB:
There are only two possible outcomes of any trial:
(1) The Bensemanns succeed against Dr Shirley. He is fully insured, quite apart from his own personal financial position. There is no real risk that the Bensemanns would be unable to collect on the judgment. In these circumstances, the claim against WDHB is redundant;
(2) The Bensemanns fail against Dr Shirley. The Bensemanns’ claim against WDHB relies exclusively on the conduct (error and/or omission in advice) by Dr Shirley. So a failure against Dr Shirley automatically means a simultaneous failure against WDHB.
Accordingly, whatever outcome, WDHB’s presence adds no benefit to the Bensemanns’ prospects of a successful recovery. Additionally, it would inevitably prolong the duration of the trial, because there will be additional cross-examination of all witnesses, and an extra opening and closing. This will also increase the cost of legal aid. Although that is not an immediate cost to them, they will ultimately have to pay because their legal costs will be deducted from any judgment received or be a charge on their property.
However, the most important factor for them in favour of settlement with WDHB is the effect that we believe this will have on Dr Shirley’s attitude. Counsel, Michael Ring, has been in similar situations. The doctor refused to make any contribution to settlement, and attempted to trade on the employer/employee relationship to force the Hospital to pay. The Hospital negotiated a partial settlement with the plaintiff in return for a discontinuance. Shortly afterwards, the doctor offered (usually for the first time) a realistic figure which led to a final settlement.
The clear impression was that, while the doctor was able to hide behind the Hospital as co-defendant, there was no interest in making any realistic settlement proposal. But, once exposed as the only party, the doctor’s insurer was willing to see sense. A strong factor in this is the inevitable publicity at any trial which would focus on the doctor alone, and would be highly damaging regardless of result.
[42] An offer of $20,000 was made. The letter stated:
It is not affected by any attempt on behalf of Dr Shirley to crossclaim against it. The Hospital will still settle with the Bensemanns on these terms and then deal with any such cross claim on its (lack of) merits.
[43] On 16 December 2002 leading counsel for Mr Shirley wrote to leading counsel for the Board asserting that WDHB’s formal procedures for obtaining consent to sterilisation had been deficient but that Mr Shirley had given proper advice. The letter continued:
The action of the Board, at the instance of its insurers, in making allegations of the nature set out in its statement of claim against Mr Shirley, is of course reprehensible in any employer/employee relationship. In a case of this nature this carries the added peril that the employee will necessarily weaken the employer’s defence by pointing to systemic or procedural failures which, as in this case, have not apparently been perceived by the plaintiffs.
[44] Leading counsel for the Board responded inter alia:
...
[45] Ultimately the plaintiffs settled with the Board for $20,000 and the plaintiffs prepared a discontinuance of their claim against WDHB. Mr Shirley consented to the discontinuance, reserving his position on costs in the event that he was ultimately unsuccessful at trial. There was no mention of the alternative prospect that he succeeded. The cross-claim by WDHB against Mr Shirley accordingly fell away. Following Mr Shirley’s success at trial he applied for costs against WDHB.
The costs decision of the High Court
[46] In his decision on costs Miller J recorded Mr Shirley’s claim that his employer had let him down. In order to save some costs WDHB had been prepared to compromise the plaintiffs’ claim based on alleged negligence on the surgeon’s part. Considering that to do so would inevitably damage his professional repute and good standing, and that he had no alternative to defending the matter to protect his name and to maintain his professional reputation, counsel for Mr Shirley opposed the application on the grounds that there was no principled basis for a damages award. He was vindicated by the judgment dismissing the plaintiffs’ claim.
[47] In the course of the costs argument before the High Court, Mr Ring QC for the Board put at the forefront of his argument the insurance and employment arrangements between WDHB and Mr Shirley. Mr Hodson QC contended, and the Judge agreed, that they were irrelevant.
[48] The Judge recorded that counsel agreed that the Court has jurisdiction to award costs in these circumstances, albeit it must be exercised in a principled way. He cited the following rules:
[25]... Rule 46 provides:
Costs at discretion of Court
(1) All matters relating to the costs of and incidental to a proceeding or a step in a proceeding are at the discretion of the Court.
(2) Rules 47 to 48G apply subject to subclause (1).
[26] Rules 476A and 476E provide:
Effect of discontinuance
(1) A proceeding ends against a defendant or defendants, as the case may be, on—
(a) the filing and service of a notice of discontinuance under rule 475(1)(a); or
(b) the giving of oral advice of the discontinuance at the hearing under rule 475(1)(b); or
(c) the making of an order under rule 476.
(2) The discontinuance of a proceeding does not affect the determination of costs.
(3) This rule is subject to rule 476B.
Certain remedies not affected
If a plaintiff discontinues a proceeding in which a defendant has issued a third party notice under rules 154 to 162 or has filed a notice under rules 163 to 168, the discontinuance does not affect the continuation of the proceeding in relation to the third party notice or the notice filed under rules 163 to 168.
[49] The Judge’s careful reasoning must be set out at length:
[28] Under the High Court Rules, as Mr Ring conceded, the Court may award costs against a non-party who funds litigation and controls it or is to benefit from it: Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2005] 1 NZLR 145 at [25]. Such awards do not rest on a right to contribution or indemnity, whether in tort or otherwise. Rather, it has been held that the rationale is that it is wrong to allow someone to fund litigation in hope of a benefit without a corresponding risk of exposure to costs: Arklow Investments Ltd v MacLean (High Court Auckland, CP 49/97, 19 May 2000, Fisher J).
[29] Mr Ring also submitted that the Board’s position for present purposes is that of a non-party. As Mr Hodson confirmed, all the costs claimed were incurred after the plaintiff’s discontinuance. The Board also discontinued its cross-claim.
[30] I accept that the Board ceased to be a party to the litigation by August 2003. However, I do not consider that it became a non-party of the sort referred to in Dymock Franchise Systems (NSW) Pty Ltd v Todd (No. 2). That case concerned a company, Associated Industrial Finance Pty Limited, which had funded the Todds’ litigation. Mrs Todd’s family beneficially owned the company. The Board was not a non-party in that sense. On the contrary, it was vicariously liable to the plaintiffs for Mr Shirley’s work, with a very real interest in the litigation, and it was a party when it took the decision that resulted in Mr Shirley being joined. Rule 476A(2) provides that discontinuance of a proceeding does not affect the determination of costs. I conclude that the jurisdiction under R46 extends to a former party which has discontinued, but whose conduct of the litigation has caused the applicant to incur costs.
[31] In Dymock, the Privy Council assumed ... that causation must be shown in a claim for costs against a non-party. I have found the Board is a party for purposes of this application, but I accept that causation is necessary on the facts of this case. The Board was entitled to settle independently of Mr Shirley. It did so for the understandable reason that it wished to avoid costs and eliminate trial risk. Settlement is to be encouraged. In such circumstances, there could be no justification for an award of costs subsequently incurred, in the absence of either a right to indemnity or some conduct on the Board’s part that caused Mr Shirley to incur costs that he otherwise would not have incurred.
Exercise of discretion
[32] This is not a case in which the Board controlled the plaintiff’s action and hoped to benefit from it. However, the Board procured the plaintiffs to take a step – joining Mr Shirley – that the evidence suggests they would not otherwise have taken. I accept Mr Ring’s submission that the plaintiffs were also involved. Their counsel signed the consent memorandum and filed the amended statement of claim. But the evidence is clear that they joined Mr Shirley at the Board’s urging. But for the Board’s actions, the costs that are the subject of this application would not have been incurred.
[33] I accept that the Board was entitled to join Mr Shirley. Counsel, both of whom are very experienced in this field, differed on the question whether employers regularly claim indemnity from negligent consultants. Mr Ring said that such claims occur regularly; Mr Hodson said they are very rare. But the consultant normally has an implied obligation to the employer to exercise reasonable care and skill (Lister v Romford Ice Co Ltd [1956] UKHL 6; [1957] AC 555, and the Board was within its rights to seek indemnity. By doing so, however, it exposed itself to costs.
[34] Further, the Board’s motivation was unashamedly tactical. It wanted to force Mr Shirley to contribute to a settlement. It was inherent in joinder that Mr Shirley would incur costs and confront trial risk unless he settled. That, rather than pursuit of indemnity, was the Board’s real rationale for joining him. It is why the Board chose to expose him to independent liability by having him joined as a defendant, instead of issuing a third party notice. As Mr Ring argued, there is nothing wrong with that. But having behaved in that way, the Board cannot complain when Mr Shirley seeks costs resulting from the Board’s decision. The connection between its conduct of the litigation and his costs is sufficiently direct to establish causation.
[35] Mr Ring argued that had the plaintiffs not co-operated, the Board would have issued a third party notice so the costs would have been incurred in any event. I do not think the point assists him. Had the Board then settled with the Bensemanns, Mr Shirley as a third party would not have been faced with the costs of trial. Nor, given his clear and consistent insistence on vindication, would he have contributed to settlement. Had the Board gone to trial, he would have been entitled as a successful third party to costs against the Board under R47(a). (I accept that some allowance might have been made for the vicarious nature of the Board’s liability and its inability to recover costs from the legally aided plaintiffs.)
[36] I do not attach significance to Mr Shirley’s belief, keenly held though it is, that his employer let him down by not sticking with him through the litigation after he had been joined. That may have encouraged the plaintiffs, as Mr Hodson submitted, but the Board was entitled to settle even if it gave the plaintiffs renewed hope by doing so. I accept Mr Ring’s submission that the Board had no obligation to join cause with Mr Shirley, and did no wrong by exercising its right to settle. It is not for the Court to second-guess such a decision, but I add that nor was the Board’s decision to settle a mistake, notwithstanding the result at trial. It settled for a trivial proportion of the damages likely to be claimed (the costs of raising a child) had Mr Shirley been found negligent, and it paid less than its likely costs of going to trial.
[37] Nor do I lose sight of the fact that, having been joined, Mr Shirley chose to go to trial, on his own account preferring to seek vindication rather than to settle. That was his right, as Mr Ring acknowledged. However, I accept what I take to be Mr Ring’s submission that the desire for vindication justifies a reduction in any award of costs in this case. Costs awards should assume a reasonable approach to litigation in which financial considerations play a part. It does not appear that either costs or the risk that he would fail at trial played a substantial part in Mr Shirley’s thinking. It is true that the case had a high public profile, which naturally heightened Mr Shirley’s concern for his reputation. But had matters proceeded as he wished, he would not have been joined at all. In that case, he would not have had the opportunity to use the trial for vindication; the decision to settle or not would have been the Board’s alone.
[38] Against that, having been joined Mr Shirley’s only alternative to trial was settlement. It is a reasonable assumption that he would have had to pay something to settle. There is no evidence whether that would have been more or less than the Board paid or more or less than he incurred in costs. The most that can be said is that since the Bensemanns had been content to sue the Board alone he might have settled for a relatively modest sum.
[39] Mr Ring also referred to Mr Shirley’s failure to reserve costs on the discontinuance, but nothing turns on that. It did not affect anything the Board did.
[40] At the end of the day, the dominant consideration is that Mr Shirley was involved in the litigation only because of the Board’s decision to join him as a defendant to encourage him to contribute to settlement. It chose to join him in that way to exert pressure on him. Had he been joined as a third party, he very likely would have avoided the costs he now claims since he would have benefited from any settlement between plaintiff and defendant. Alternatively, he would have been entitled to claim costs against the Board had it gone to trial. I attribute no fault to the Board, but neither do I see that it should avoid a contribution to costs resulting from its decision, merely because it settled before trial and he did not.
[41] I conclude that an award of costs is appropriate in the unusual circumstances of this case.
Argument on appeal
[50] In opening the appeal Mr Ring sought to rely on the contracts between the Board and its senior medical officers, WDHB, QBE, Mr Shirley and MPS as matters relevant to the exercise of the Court’s costs discretion. But he disavowed any argument that the parties’ position is regulated by such contracts. Counsel agreed that this case does not require us to construe Mr Shirley’s employment contract and the significance of its provisions as to his obtaining insurance with MPS, the parties’ agreement that the employment relationship was based on mutual trust, or the provisions of the Employment Contracts Act 1991 or any implied term which might raise issues of the kind discussed in Morris v Ford Motor Co Ltd [1973] QB 792 (CA). Given such agreement I agree with the Judge that the contracts do not affect the costs discretion.
[51] Mr Ring’s further argument was that the High Court erred in the exercise of its costs discretion and should have made no order at all. Mr Hodson submitted that the Judge’s exercise of discretion was open to the High Court, entailing neither error of principle nor a result that was wholly wrong.
Discussion
[52] As Mr Ring accepted, this Court is reluctant to interfere with an award of costs which, as r 46 makes plain, of its nature is discretionary. But here I regard as fundamental that the costs order against WDHB related to costs of a proceeding by Mr and Mrs Bensemann against Mr Shirley that were wholly incurred after WDHB had ceased to be a party.
[53] The Judge did not cite r 47, headed “Principles applying to determination of costs” and commencing:
The following general principles apply to the determination of costs:
(a) The party who fails with respect to a proceeding... should pay costs to the party who succeeds...
(emphasis added)
[54] As a rule, it is wrong to depart from that principle, implicit in which is that costs are paid by, and only by, one who continues to be a party. An exception to it recognised in Dymocks is more apparent than real: in that case the non-party, which was ordered to pay costs, had funded the litigation, substantially controlled it and stood to benefit from it.
[55] Sometimes conduct antedating the litigation has been held relevant to the exercise of the costs discretion. A leading New Zealand statement of principle is by Gresson J for the Court of Appeal in King v Foxton Racing Club [1953] NZLR 852 at 856:
...the discretion which the Court is called upon to exercise in regard to costs entitles the Court to disallow even a successful defendant his costs where, as Atkin, L.J., said in Ritter v. Godfrey ([1920] 2 K.B. 47), “there is evidence that the defendant (1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation or expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains” (ibid., 60). It is expressed more shortly in Donald Campbell and Co., Ltd. v. Pollak ([1927] A.C. 732) ... in these words: “To justify an order refusing a (successful) defendant his costs, he must be shown to have been guilty of conduct which induced the plaintiff to bring the action, and without which it would probably not have been brought” (ibid., 814, 815). The defendant’s conduct brought about the litigation and it may not be an overstatement to say of the defendant (using the language of Eve, J., in Ritter v. Godfrey ([1920] 2 K.B. 47, 67) that it goaded the appellants into a litigation on which they would never have embarked but for the defendant’s attitude.
The conduct referred to in these cases does not extend to a procedural suggestion by one defendant that another be joined, or even successful actual application for joinder, where the costs relate to conduct of the proceedings after the former defendant has ceased to be a party.
[56] In England and Australia there is clear reluctance to pay regard to conduct preceding the litigation in which the claimant for costs is engaged. In Jacobi Enterprises Ltd v Hansells (NZ) Ltd HCAK CP386-SD01 27 May 2004 it was stated:
[11] In England the Court of Appeal has held that it is wrong to refuse costs on the basis of external conduct not forming part of the litigation, even when the conduct giving rise to the transaction underlying the proceedings was dishonest: Hall v Rover Financial Services (GB) Ltd [2002] EWCA Civ 1514. A similar approach has been followed in Australia: Cretazzo v Lombardi (1975) 13 SASR 4 and Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129. It is unclear from the short judgment in Clarence Holdings Limited v Hall (No. 2) CA176/00, 14 June 2001 whether the refusal of costs was by reason of an application of the principles in King v Foxton Racing Club but it would be wrong to assume that in the absence of any mention of it the authority of that leading case was queried. The latest judgment of the Court of Appeal in Glaister v Amalgamated Dairies Limited CA99/03, 1 March 2004 emphasises that discretion is generally exercised in accordance with the specific rules in rr 47-48G. Any departure from the rules’ allowances is to be done in a particularised and principled way.
[57] Mr Shirley elected to consent to the discontinuance rather than to retain WDHB as a party and pursue a cross-claim against it as he might have chosen to do. No authority was cited where the conduct of simply persuading a plaintiff to join another defendant or defendants, making the application for joinder, and then settling and securing consent to discontinuance, has resulted in an adverse costs award following the subsequent trial between other parties.
[58] A major purpose of the costs rules is to reduce uncertainty and consequent expense and delay in fixing costs. I do not regard the conduct of WDHB in this case either as falling within the existing exceptions to r 47(a) or as justifying by recourse to r 46 departure from principle that is well settled.
[59] There are powerful policy as well as precedent considerations telling against Mr Hodson’s submission. I accept Mr Ring’s argument that it would be an unacceptable disincentive to settlement if a party (who had achieved what it thought was resolution of the case) were to be subject to a continuing liability for future costs of a proceeding over which it had no control, just because at an earlier stage it had secured the joinder of another party. Any proposed change of settled practice having consequences of such magnitude should in my view be via the consultation processes of the Rules Committee rather than by exercise of judicial discretion in a single case.
[60] The appeal should be allowed with costs of $5,000 and usual disbursements to the Board.
[61] Having prepared the foregoing reasons I have read and agree with those written by Heath J.
HEATH J
[62] I agree with Baragwanath J, for the reasons he gives, that the appeal ought to be allowed with the consequences he proposes. As we are differing from Miller J, I prefer to write separately.
[63] The relevant facts have been set out in judgments delivered by both Robertson and Baragwanath JJ. I gratefully adopt their narratives.
[64] The underlying problem involves the relationship between the parties and their respective indemnifiers. The Board was sued as the entity responsible for the work of surgeons in its hospital, but the claim of negligence relates to advice given by the surgeon, before the operation.
[65] The objectives of the Board’s indemnifiers are commercial in nature. Thus, if a claim can be settled for a sum that is less than its likely trial costs it may be minded to settle. But, the objectives of the indemnifiers for the medical practitioner extend beyond commercial imperatives and include protection of the professional reputation of a medical practitioner. The medical practitioner’s insurer is a mutual society formed to insure members of the medical profession. No doubt there are benefits to medical practitioners if the costs of defending claims brought against them were met by an insurer other than their own.
[66] While I agree with Baragwanath J that the contractual insurance arrangements play no part in the determination of this appeal, the different motivations of the respective indemnifiers helps to explain why two insurers are in dispute in this Court over a relatively small award of costs.
The basis for the costs order
[67] Miller J conducted the trial of the substantive proceeding brought by Mr and Mrs Bensemann against the Board. Thus, on being apprised of the particular issues arising as between the surgeon (Mr Shirley) and the Board, he was well placed to make findings of fact in relation to the costs claim of Mr Shirley.
[68] The Judge found that the costs claimed by Mr Shirley would not have been incurred had the Board not persuaded Mr and Mrs Bensemann to join Mr Shirley as a defendant.
[69] Miller J found the Board’s motivation to have Mr Shirley joined to be “unashamedly tactical”. It was inherent in joinder that Mr Shirley incur costs and confront trial risks, unless he settled. That, rather than the true pursuit of indemnity, was the Board’s real rationale for joining him.
[70] The Judge, however, did not regard that as blameworthy conduct. Nor did he make any finding of bad faith against the Board. Miller J regarded the Board’s action as a legitimate tactical measure, albeit one that exposed the Board to the possibility of an order for costs.
[71] The reason given by the Judge for exercising his discretion in favour of Mr Shirley was expressed in his judgment as follows:
[40] At the end of the day, the dominant consideration is that Mr Shirley was involved in the litigation only because of the Board’s decision to join him as a defendant to encourage him to contribute to settlement. It chose to join him in that way to exert pressure on him. Had he been joined as a third party, he very likely would have avoided the costs he now claims since he would have benefited from any settlement between plaintiff and defendant. Alternatively, he would have been entitled to claim costs against the Board had it gone to trial. I attribute no fault to the Board, but neither do I see that it should avoid a contribution to costs resulting from its decision, merely because it settled before trial and he did not. (my emphasis)
Costs: general principles
[72] A new costs regime was introduced in the High Court with effect from 1 January 2000. The new rules require a more prescriptive approach to the fixing of costs than was previously undertaken by the Courts.
[73] In Commerce Commission v Southern Cross Medical Care Society [2004] 1 NZLR 491 (CA) at 495-496, Fisher J, delivering the judgment of the Court said at [18]:
... In the interests of predictability and expedition, Courts will be less inclined to depart from the prescribed approach. The prescribed approach includes the presumption that costs follow the event. However, we do not think that the Court should hesitate to depart from that approach where clear reason for it is shown. The public interest role of the commission is capable of satisfying that requirement.
[74] Rule 46 of the High Court Rules (the Rules) continues to provide a general discretion in the award of costs. Nevertheless, in Glaister v Amalgamated Dairies Ltd [2004] NZCA 10; (2004) 16 PRNZ 1047 (CA) at [22], [24] and [28], this Court held that the discretion exists to enable unexpected and unforeseen events to be accommodated fairly. The discretion and the specific rules should be seen as complementary, designed to produce an effective whole.
[75] Rule 46 cannot be seen as a general discretion to do what a particular Judge may consider fair and just in a particular case, unless the discretionary approach accords with the principles and purposes of the costs rules: Glaister at [22].
[76] Various principles applicable to an award of costs are set out in r 47 of the Rules. Rule 47(a) is relevant. It provides:
47 Principles applying to determination of costs
The following general principles apply to the determination of costs:
(a) The party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
...
[77] In this case, Mr Shirley was a successful party as against Mr and Mrs Bensemann. The Board was, as Mr Ring QC put it, “a not unsuccessful” party, it having extracted itself from the proceeding on payment of a sum of money to Mr and Mrs Bensemann.
[78] Nothing is said, in r 47, to indicate any general approach to claims as between successful defendants or between a successful defendant and one against whom the plaintiff has discontinued.
What happened in this case?
[79] In order to depersonalise the issues in this case I use abbreviations. I refer to Mr and Mrs Bensemann as “P”; to the Board as “D1” and to Mr Shirley as “D2”.
[80] P, both legally aided, sued D1 in respect of alleged negligence by D2.
[81] D1 was sued in its capacity as employer of D2. Even though the person alleged to have given negligent advice, D2 was not sued personally.
[82] D1 (acting through its indemnifiers) tried to settle with P. The amount D1 was prepared to pay (on a commercial basis) to rid itself of trial risk was insufficient to persuade P to settle.
[83] In an endeavour to facilitate its desire to settle, D1 persuaded P to join D2 as an additional defendant. After D2 was joined, D1 issued a cross claim against him.
[84] D1 settled with P. P discontinued, with the consent of D2, against D1. The cross claim between D1 and D2 became a dead letter.
[85] D2 reserved his position as to costs against D1 should he be unsuccessful as against P, but not otherwise.
[86] P continued against D2. At trial, D2 was successful.
[87] As P was legally aided, D2 did not seek costs against P. Rather he sought costs against D1 for trial costs post joinder, not limited to the time at which P discontinued against D1.
Ought a costs order to have been made?
[88] What is there in the facts set out in [79]-[87] above that justifies a costs order being made in favour of D2 against D1?
[89] In all cases in which an order for costs is made there will be a causal link between the costs of a successful party and the actions of a party or non party against whom costs are ordered. Causation is a necessary incident of the jurisdiction to award costs.
[90] Mr Ring QC referred us to a number of cases in which orders for costs had been made as between defendants. In his submission, those costs orders were justified because both causation and another additional element existed.
[91] In cases where a successful defendant seeks costs against an unsuccessful defendant, the two elements are causation and success: see Lane Group Ltd v DI and L Paterson Ltd [2000] 1 NZLR 129 (CA) at [84] per Tipping J, with whom Henry J agreed. Tipping J said:
[84] While it may have been reasonable for the plaintiff to join both defendants, that of itself does not entitle the plaintiff to an order that the unsuccessful defendant should pay the successful defendant’s costs, either directly (as a Sanderson order) or indirectly (as a Bullock order). The reasonableness of the original joinder is certainly a relevant factor. If such joinder was unreasonable the plaintiff cannot seek to pass costs payable by it to the successful defendant over to the unsuccessful defendant. Even if the joinder is reasonable at the outset, the position must also be looked at from the point of view of the unsuccessful defendant. If that party has done nothing to cause or contribute to the joinder of the successful defendant, that will be a point in its favour. The converse also applies. How the proceeding develops may well be relevant. Another factor which may be of moment comes into play if an unsuccessful defendant is found liable for significantly less than the claim made against both itself and the successful defendant. Such a situation will be relevant to the ultimate discretion because the costs payable in that event by the plaintiff to the successful defendant (based on the amount claimed) will be more than the costs payable by the unsuccessful defendant to the plaintiff (based on the amount recovered).
[92] In the case of a claim for costs by a successful defendant against a non-party (generally) there will be, in addition to a causal nexus, both an unsuccessful party and an entity which, in economic terms, can be equated to the unsuccessful party: eg Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2005] 1 NZLR 145 (PC). At [25](3), Lord Brown of Eaton-under-Heywood, delivering the advice of the Privy Council, said:
(3) Where, however, the non–party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non–party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation, a concept repeatedly invoked throughout the jurisprudence – see, for example, the judgments of the High Court of Australia in Knight [v FP Special Assets Ltd (1992) [1992] HCA 28; 174 CLR 178; 107 ALR 585] and Millett LJ’s judgment in Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1997] 1 WLR 1613. Consistently with this approach, Phillips LJ described the non–party underwriters in TGA Chapman Ltd v Christopher [1998] 1 WLR 12 as “the defendants in all but name”. Nor, indeed, is it necessary that the non–party be “the only real party” to the litigation in the sense explained in Knight, provided that he is “a real party in . . . very important and critical respects” – see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, referred to in Kebaro [Pty Ltd v Saunders [2003] FCAFC 5] at pp 32 – 33, 35 and 37. Some reflection of this concept of “the real party” is to be found in CPR 25.13(1)(f) which allows a security for costs order to be made where “the claimant is acting as a nominal claimant”.
[93] Although an earlier passage in the Privy Council’s advice refers more generally to “exceptional” cases, those were limited to cases “outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense:” [25](1). Lord Brown described the touchstone for invocation of this aspect of the discretion as depending on whether such an order was “just”.
[94] There have also been cases in which misconduct on the part of one party has caused unnecessary costs to be incurred by another. Those cases are not relevant for present purposes because Miller J made no finding of bad faith or misconduct against the Board.
[95] Reverting to the neutral terminology, D2 is the successful litigant. P are the unsuccessful litigants. D1 having settled, was neither successful nor unsuccessful in its capacity as a litigant.
[96] Just as D1 chose to pay money to P to avoid trial risk, so too did D2 choose not to settle but to incur the costs of trial, knowing P were legally aided. There was nothing in what D1 did to minimise its trial risk that affected the decision of D2 to proceed to trial. Reputational issues overrode financial considerations from D2’s perspective.
[97] The effect of discontinuance must also be considered.
[98] Rule 475(1)(a) entitles a plaintiff to discontinue a proceeding by filing a notice of discontinuance on another party to the proceeding.
[99] Rule 476A(1)(a) provides that filing and service of a notice of discontinuance ends the proceeding against a defendant. That discontinuance does not, however, affect determination of costs: r 476A(2).
[100] Rule 476E preserves certain remedies when cross notices have been issued under rr 163-168. Rule 476E does not affect the continuation of proceedings in relation to that cross notice. On occasion, a defendant who has settled with a plaintiff will want to seek contribution through a cross notice and will, therefore, proceed against another defendant. But that is not what happened here. From the moment the claim against D1 was discontinued by P, the cross claim became a dead letter. No further costs were incurred, in relation to D1’s claim, by D2.
[101] There are many types of cases that involve multiple defendants. There is much merit in having all (including unwilling) potential defendants brought before the Court to enable settlement to be achieved. Parties to litigation should not be deterred from ensuring that relevant parties are before the Court. Equally, however, if there were no basis to join or if joinder was for an improper purpose, the additional element of misconduct would arise to provide a justification for any costs order.
[102] Often in cases involving alleged building defects there will be joinder of parties who had different roles in the design and building process. Those people may extend from the architect, to the developer, to the builder and to various sub contractors contracted by the builder to perform work.
[103] There must be some predictability in outcome. If this Court were to uphold an approach to the exercise of a discretion as to costs which sees a defendant against whom a plaintiff has discontinued (and who has no live cross claim against another defendant), as liable for the costs of a successful defendant, an inappropriate disincentive might arise for a defendant to persuade a plaintiff to have all relevant parties before the Court for the purpose of promoting settlement.
[104] In this case, I can see no principled basis on which an order for costs could have been made because:
(a) Miller J founded his decision on a decision to encourage a plaintiff to bring an appropriate defendant before the Court; an approach he accepted was a legitimate tactical step. Given the free choice of Mr Shirley to proceed to trial after the Board settled, I find it difficult to understand why a party against whom the plaintiff has discontinued and who retains no live claim against a co-defendant should be liable in respect of subsequent trial costs over which it has no control.
(b) There was no reservation by Mr Shirley in relation to costs against the Board should he be successful in his defence of Mr and Mrs Bensemann’s claims. While costs are reserved on discontinuance (r 476A(2)) Mr Shirley’s reservation of position was linked to one situation. The reservation only applied in the event that he was unsuccessful. Yet, he sought costs on a different basis, well after the time the Board believed it had limited its exposure in the litigation.
(c) I do not, with respect, share Miller J’s view (see [40] of his judgment at [71] above) that Mr Shirley would likely have avoided costs had he been joined as a third party, rather than as a defendant. It was quite clear that the Board was not prepared to pay more than a specific sum to settle. Further, it was clear the plaintiffs would not settle unless they had someone else against whom they could proceed. In the absence of a contribution towards settlement from Mr Shirley, it is highly likely that Mr Shirley would have incurred the same costs: only, on this view the Board would also have incurred trial costs.
(d) I do not read Dymocks as applying to a case such as this: see [25] of Dymocks. There is nothing bringing this case into the exceptional category to which Lord Brown refers in [25](1). Specifically, I do not regard the joinder of a proper party to litigation at the instigation of a co-defendant against whom a claim is subsequently discontinued as amounting to the type of “exceptional” circumstance Lord Brown had in mind. The Board was minimising its exposure by endeavouring to settle. It was entitled to do that. Nor was the Board a funder or surrogate beneficiary to the litigation. It follows that the Dymocks principles do not support the exercise of a costs discretion in the manner that occurred in this case.
Solicitors:
Duncan Cotterill, Nelson, for
Appellant
Rainey, Collins, Wright & Co, Wellington, for First
Respondent
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2005/307.html