Regan v Brougham [2021] NZCA 154 (3 May 2021)

Last Updated: 11 May 2021

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA666/2017 [2021] NZCA 154

	BETWEEN	CHRISTINE ANNA ELIZABETH REGAN AND MARK JEFFEREY TUFFIN AS TRUSTEES OF THE WINCHESTER TRUST Appellants
	AND	BRYCE BROUGHAM First Respondent RACHAEL CHRISTINA DEY Second Respondent

Court:	French, Collins and Goddard JJ
Counsel:	F A King for Appellants J K Mahuta-Coyle for First Respondent
Judgment: (On the papers)	3 May 2021 at 9 am

JUDGMENT OF THE COURT AS TO COSTS

1. The costs in this Court are to be calculated on the basis of a category two daily recovery rate.
2. Costs in the High Court are to be calculated in accordance with the daily recoverable rate that applied prior to 1 August 2019.

100. Costs in the District Court on both the claim and the counterclaim are to lie where they fall.

4. Leave is reserved to the parties to come back to the Court in the event of there being any further issues arising out of the calculation of costs in accordance with this judgment.

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REASONS OF THE COURT

(Given by French J)

Introduction

• [1] This proceeding has had a long and chequered history during the course of which the trustees of the Winchester Trust have sought with varying degrees of success to enforce a guarantee of $50,000 against Mr Brougham.
• [2] It began in the District Court where the District Court dismissed the trustees’ claim and also dismissed a counterclaim by Mr Brougham.^[1] The trustees appealed tothe High Court and Mr Brougham cross-appealed but both the appeal and the cross‑appeal were dismissed.^[2] Mr Brougham did not pursue his counterclaim argument any further but the trustees obtained leave to bring a second appeal in this Court.^[3] The trustees succeeded in this Court.^[4] And in a separate costs judgment, this Court awarded them reasonable indemnity costs in accordance (as this Court saw it) with the terms of the guarantee.^[5] However, subsequently, the liability decision of this Court was in turn reversed by the Supreme Court in a third appeal brought by Mr Brougham.^[6]
• [3] The Supreme Court quashed all awards of costs and disbursements that had been made in favour of the trustees in the Courts below. It further directed that all awards of costs and disbursements (other of course than the costs awarded in the Supreme Court itself) were to be re-assessed by this Court in light of the Supreme Court decision.^[7]
• [4] The parties have reached agreement on most aspects of costs but there remain a number of issues which require judicial determination. We record that there does not appear to be any contested issue regarding disbursements and refund of security for costs.
• [5] We now address each of those issues, noting that when we refer to the parties we are referring to the trustees and Mr Brougham. The second respondent Ms Dey is not involved in the dispute about costs.

Costs in the Court of Appeal

• [6] The only issue on which the parties cannot agree is whether this was a complex or standard appeal which impacts on whether the daily recovery rate is category three or category two under the High Court Rules 2016.^[8]
• [7] Contrary to a submission made on behalf of Mr Brougham, the fact the case was argued with different results in four courts does not of itself make the appeal complex. There was not a large volume of documentary material and the legal issues were narrow. That is certainly how this Court would have categorised the proceeding in its earlier costs judgment had it been a situation of making an award of scale costs, rather than costs under the terms of the guarantee.
• [8] We therefore direct that the calculation is to be made on the basis of the daily recovery rate for a category two proceeding in the High Court.^[9]

Costs in the High Court

• [9] The only issue in dispute relates to the applicable daily recovery rates. The rates increased as the result of an amendment which came into force on 1 August 2019. They were not retrospective. All of the steps taken in the proceeding including the unsuccessful application for leave to appeal were taken before 1 August 2019. The applicable rate is the one that applied prior to 1 August 2019.

Costs in the District Court

• [10] Costs were never fixed in the District Court. In our previous costs decision, we found that the most just division of the costs as between claim and counterclaim was 30:70. That was because in the District Court, the argument was primarily evidential and the counterclaim occupied the majority of the hearing time.^[10]
• [11] There is nothing in the Supreme Court decision that would justify a departure from that allocation.
• [12] However, Mr Brougham seeks to rely on two “without prejudice save as to costs” settlement offers he made as reason for us to either:

(a) reverse any liability in respect of the counterclaim so as to award him 100 per cent of scale costs because the offers well exceeded the benefit ultimately obtained by the trustees, citing r 14.11 of the District Court Rules 2014;^[11] or

(b) award increased costs of 40 per cent on the claim assuming his liability for counterclaim remains, citing r 14.6(3)(b)(v) of the District Court Rules.^[12]

• [13] The first offer was made on 12 December 2014 following a judicial settlement conference and the making of an order for discovery. It proposed a settlement of all claims whereby Mr Brougham would pay the trustees $20,000, the first $10,000 payable within 21 days and the second $10,000 payable by way of “instalments” over 12 months. Under the terms of this offer, costs were to lie where they fell and the trustees would be required to discontinue the proceeding once a settlement deed was signed, that is to say before payment of the $20,000 had been made in full.
• [14] The second settlement offer relied upon was made on 2 November 2015. This was after the first round of discovery had been completed but about seven months before briefs of evidence were required to be exchanged. The terms of the offer were that in full and settlement of all disputes between the parties, Mr Brougham would pay the trustees the sum of $35,000 by 20 November 2015. Costs were again to fall where they lay. Under r 14.6(3)(b)(v), Mr Brougham is only entitled to increased or indemnity costs if the trustees rejected the offers without reasonable justification. In light of the fact that the trustees’ position on the enforceability of the guarantee succeeded in this Court, we do not consider it tenable to suggest they acted unreasonably. We also note it is apparent from the correspondence supplied to this Court that the trustees engaged in good faith in settlement negotiations and made offers of their own.
• [15] The application of r 14.11 is not quite so straightforward. On its face, it is directed at the situation where the losing party has made an offer under r 14.10 that would be more beneficial or almost as beneficial to the winning party than the judgment the winning party ultimately obtained. The trustees were only the winning party in relation to the counterclaim. On the other hand, the offers were global offers involving settlement of both the counterclaim and the claim. The question therefore arises whether the benefit of the judgment for the purposes of rule 14.11 is to be assessed solely by reference to the counterclaim outcome or the outcome of the proceeding as a whole.^[13] In circumstances where it was reasonable for the trustees to continue to pursue the claim, there are obvious difficulties in applying the latter.
• [16] Regardless of which approach is taken, we consider the first offer should not be taken into account for costs purposes. It contained a significant element of risk for the trustees because it required them to discontinue the proceeding before the settlement had been implemented and thus lacked certainty.
• [17] The second offer however did not contain the same risk to the trustees. Therefore if r 14.11 applies to the outcome of the proceeding as a whole, that is, on a net basis, then Mr Brougham has an argument for saying he is entitled under the rule to 100 per cent of costs on all steps taken in the proceeding in the District Court after 2 November 2015.
• [18] Like all costs rules, r 14.11 is however subject to the Court’s over-riding discretion.^[14] Having regard to all the circumstances including the allocation of time as between claim and counterclaim, the result in respect of each, the 2 November 2015 offer, and the fact that it was reasonable for the trustees to continue to pursue the claim, we have concluded that the most just solution is for costs in the District Court relating to both the claim and the counterclaim to lie where they fall. We are unsure whether any costs have been paid in respect of the District Court proceeding but in the event they have been paid then they should obviously be refunded.

Outcome

• [19] The costs in this Court are to be calculated on the basis of a category two daily recovery rate.
• [20] Costs in the High Court are to be calculated in accordance with the daily recoverable rate that applied prior to 1 August 2019.
• [21] Costs in the District Court on the claim and the counterclaim are to lie where they fall.
• [22] We do not anticipate there should be any further matters requiring judicial intervention but reserve leave to the parties to come back to this Court in the event of there being any further issues arising out of the calculation of costs in accordance with this judgment.
• [23] Finally, in all the circumstances, we make no award of costs in relation to this costs dispute.

Solicitors:
McKenna King, Hamilton for Appellants
Macalister Mazengarb, Wellington for First Respondent

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^[1] Regan v Brougham [2016] NZDC 1855.

^[2] Regan v Brougham [2017] NZHC 1091.

^[3] Regan v Brougham [2018] NZCA 157.

^[4] Regan v Brougham [2019] NZCA 401, [2020] 2 NZLR 299.

^[5] Regan v Brougham [2020] NZCA 173 [CA first costs judgment].

^[6] Brougham v Regan [2020] NZSC 118.

^[7] At [70].

^[8] Court of Appeal (Civil) Rules 2005, rr 53B(1) and 53C(1). See also High Court Rules 2016, sch 2.

^[9] Rule 53C(1)(a).

^[10] CA first costs judgment, above n 5, at [53].

^[11] Mr Brougham’s counsel cited the High Court Rules, r 14.11 which mirrors District Court Rules 2014, r 14.11.

^[12] Rule 14.6(3)(b)(v) of the District Court Rules mirrors r 14.6(3)(b)(v) of the High Court Rules.

^[13] CA first costs judgment, above n 5, at [97].

^[14] District Court Rules, r 14.11(1).