Acernus Aero Limited v Vincent Aviation Limited [2014] NZCA 246 (16 June 2014)

Last Updated: 25 June 2014

IN THE COURT OF APPEAL OF NEW ZEALAND
CA532/2013 [2014] NZCA 246
BETWEEN	ACERNUS AERO LIMITED Appellant
AND	VINCENT AVIATION LIMITED Respondent

Hearing:	29 May 2014
Court:	Ellen France, Harrison and White JJ
Counsel:	J R Sumner for Appellant J K Scragg and P H Higbee for Respondent
Judgment:	16 June 2014 at 11.30 am

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The appellant must pay the respondent costs for a standard appeal on a Band A basis together with an increase of 50 per cent and usual disbursements.

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REASONS OF THE COURT

(Given by Harrison J)

Introduction

[1] Acernus Aero Ltd appeals against a judgment of Miller J delivered in the High Court at Wellington,^[1] ordering it to pay costs to the respondent, Vincent Aviation Ltd, following the earlier dismissal at trial of its claim for damages and other relief.^[2]

Background

[2] Acernus owned a Cessna aircraft which it hangared at Vincent’s premises at Wellington Airport. A dispute arose between the parties about fees. A modest sum was at issue. Acernus issued a proceeding in the High Court, seeking substantive and interim relief. Clifford J determined an interim application in February 2012^[3] before the proceeding came to trial before Miller J in February 2013.
[3] Acernus pleaded five distinct causes of action. The company abandoned the first three – for breaches of various contractual instruments – during trial. Following trial, Miller J delivered his substantive judgment, dismissing Acernus’ remaining two claims for breach of contract. In the result its claim failed entirely.
[4] Vincent filed a statement of defence and pleaded three counter-claim causes of action. Miller J entered judgment for it on the first for $7,510.95 but dismissed the other two.
[5] Towards the end of his substantive decision the Judge noted:

[73] This result might suggest that honours have been more or less evenly shared. That is not so. In my opinion the real motive for the litigation was Acernus’s desire to gain access to the small hangar through its claim for relief against forfeiture. That claim was always both untenable and certain to meet resolute opposition; and it was withdrawn when I challenged Mr Toebes about the evidence for a lease after hearing the evidence of both principals. Overall, Vincent has clearly been the successful party. I am disposed to allow it costs on a 2B basis with provision for one counsel, subject to a deduction of perhaps 30 per cent for those issues on which it did not succeed.

[6] Despite Miller J’s guidance, the parties were unable to agree on costs. Memoranda were filed and the Judge delivered his costs judgment. In it he noted:^[4]

[4] However, as I sought to make quite clear in my earlier judgment, overall the defendant was the successful party. The plaintiff’s claim was in my opinion not motivated at all by the allegedly unreasonable conduct of the defendant, as is now claimed, but by its own pursuit of something to which it manifestly was not entitled; control of the small hangar. Further, the offer made by the plaintiff was on the final day of trial, and would result in a sum less than what was awarded to the defendant. Costs should follow the event here.

[7] On this basis the Judge determined that Acernus should pay costs as follows:

[9] Here, it is not appropriate to award costs for further inspection of lists, or preparation for further lists of documents following the order for specific and further discovery.

[10] The next question is whether increased costs are appropriate. My initial indication was that they would not be, but I have changed my mind with benefit of the memoranda regarding costs. This is a proper case for an increased allowance to reflect additional costs to which the defendant was put by the plaintiff’s intransigent conduct of the litigation. I generally accept the particulars given by Mr Scragg in his memorandum at [20]. I will allow an additional $10,000.

Appeal

[8] Acernus appeals against the costs judgment on three main grounds which we address below. However, to succeed it must show that Miller J erred in exercising his statutory discretion,^[5] which must of course be exercised on a principled basis.^[6] The assessment of costs is essentially a matter for the Judge who has the conduct of the case.^[7] In deference to the special advantage enjoyed by a trial judge, this Court is slow to upset costs awards.^[8] Acernus must satisfy us that the Judge proceeded on a wrong principle, gave undue or insufficient weight to certain factors or was plainly wrong.

(a) Successful party

[9] First, Mr Sumner submitted that Miller J erred by treating Vincent as the successful party. The Judge’s conclusion to this effect was misplaced upon his separate finding that Acernus acted unreasonably in bringing the proceeding – that is, because its real motive was to gain access to an aircraft hangar. In reality, Mr Sumner submitted, both parties failed and costs should have followed that event, with each side being responsible for its own costs.
[10] We do not accept this submission. Acernus initiated and pursued this proceeding with intensity and expedition. It claimed damages optimistically estimated to be in the range of $200,000 to $450,000. As noted, it pleaded five separate causes of action: three were so plainly untenable that they were abandoned during trial, and it failed on the other two.
[11] In filing its defence and counter-claims, Vincent was essentially reacting to Acernus’ determination to proceed. Its claim would have gone to trial irrespective of the existence of Vincent’s counter-claims. Acernus did not appeal against the substantive judgment. The position for costs purposes was put beyond doubt by Vincent’s modest success on its counter-claim. When the litigation is viewed in totality, Acernus was plainly the unsuccessful party overall.
[12] We accept that in the passage cited earlier^[9] from the substantive judgment Miller J may have conflated the factors of Vincent’s success and Acernus’ improper motive to justify an award in Vincent’s favour. Acernus’ unreasonable conduct is relevant to the separate issue of the appropriate measure of costs. However, as we have said, the Judge’s finding that Vincent was the successful party is discretely justifiable. Acernus has not shown that the Judge erred in any respect when exercising his discretion to award costs in Vincent’s favour.

(b) Increased costs

[13] Second, Mr Sumner submitted that the Judge applied an incorrect test in awarding increased costs. He submitted that an objective assessment discloses that Acernus acted reasonably. Among other things, he submitted that Vincent’s conduct left Acernus with no option but to commence litigation; Acernus appeared to establish an arguable case for its claim at the interim junction stage; the litigation became encumbered with Vincent’s unsuccessful counter-claims; and Acernus was justified in refusing settlement offers made by Vincent before trial.
[14] Again, we are not satisfied that Miller J erred in any material respect when exercising his discretion to award increased costs. He enjoyed the special benefit of familiarity with the facts derived from conducting the trial. It is unnecessary for us to replicate Mr Scragg’s list of nine grounds in support which Miller J accepted, including his earlier finding that Acernus acted for an improper purpose. In combination they provided a proper ground for the Judge to invoke his discretion to award increased costs. Mr Sumner has not satisfied us the Judge’s finding, that Acernus’ conduct of the litigation was intransigent, was not open to him. This ground of appeal also fails.

(c) Calculation

[15] Third, Mr Sumner submitted that Miller J’s approach to an adjustment for costs for time spent on Vincent’s failed claim was wrong in principle. The Judge held that Vincent’s counter-claim contribution to the proceeding was 30 per cent. He applied this reduction to Vincent’s total claim for costs. Mr Sumner submitted that the Judge should have followed the methodology established by this Court in Paper Reclaim Ltd v Aotearoa International Ltd.^[10] On that approach the Judge should have adjusted costs by reference to time spent on the particular issues on which Vincent failed.
[16] We do not accept this submission. It is essentially another way of saying that the Judge has erred in his assessment of the relative success of the parties and fails for the reasons already analysed. Paper Reclaim was a very different case, where judgment was given following a trial of some 23 days duration. By contrast, this was a two and a half day trial.
[17] Little benefit would be gained in this case from a detailed dissection of time spent on successful and unsuccessful claims. Mr Scragg is correct that it was open to Miller J to apply a global percentage adjustment to reflect an assessment of Vincent’s counter-claim contribution to the time taken by the proceeding as a whole. So on that basis Vincent’s entitlement was reduced to 70 per cent of the costs which were otherwise recoverable.
[18] In this respect Mr Sumner submitted that the Judge wrongly awarded a costs figure of $42,785 because it included two disallowed items for further discovery. However, Mr Scragg rightly pointed out that Vincent sealed an order for costs for $41,676.90. This reduced figure took into account the disallowed items and correctly represented the amount of Miller J’s award of costs. This ground of appeal must fail.

Result

[19] Acernus’ appeal is dismissed.
[20] Acernus must pay Vincent costs for a standard appeal on a Band A basis together with an increase of 50 per cent and usual disbursements. We are awarding increased costs because we are satisfied that Acernus: (a) contributed unnecessarily to the time and expense of this appeal by pursuing arguments that on appeal lacked merit; and (b) unjustifiably failed to accept a reasonable offer made by Vincent on 5 November 2013 to allow $5,000 from the award of costs made in the High Court if this appeal was abandoned.

Solicitors:
Garnham Law, Wellington for Appellant
Duncan Cotterill, Wellington for Respondent

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^[1] Acernus Aero Ltd v Vincent Aviation Ltd [2013] NZHC 1754 (costs judgment).

^[2] Acernus Aero Ltd v Vincent Aviation Ltd [2013] NZHC 595 (substantive judgment).

^[3] Acernus Aero Ltd v Vincent Aviation Ltd [2012] NZHC 295.

^[4] Costs judgment, above n 1 (footnote omitted).

^[5] High Court Rules, r 14.1(a).

^[6] Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [16].

^[7] Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [88].

^[8] Lewis v Cotton [2001] 2 NZLR 21 (CA) at [65].

^[9] Substantive judgment, above n 2, at [73], cited at [5] above.

^[10] Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544, (2007) 18 PRNZ 743.