ELDERS V WRIGHTSON HC AK CIV 2006-404-1974 [2007] NZHC 194 (26 March 2007)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                              CIV 2006-404-1974



              BETWEEN                    ELDERS NEW ZEALAND LTD
                                         Plaintiff

         
    AND                        PGG WRIGHTSON LTD
                                         Defendant


Judgment:     26 March 2007



                         COSTS RULING OF ALLAN J




Solicitors:
Stace Hammond (K J Crossland), Hamilton ­ Fax [phone]
Chapman
Tripp (P Jagose), Wellington ­ Fax [phone]




ELDERS V WRIGHTSON HC AK CIV 2006-404-1974 26 March 2007

[1]    In a judgment
delivered on 1 December 2006, I determined in the defendant's
favour a question of law, formulated pursuant to Rule 418, concerning
the legal
consequences of an amalgamation effected under Part 15 of the Companies Act
1993. I ruled that the defendant was entitled
to costs and invited counsel to file
memoranda if they were unable to agree.


[2]    The parties have been unable to reach agreement.
         Counsel have filed
memoranda accordingly. For PGG Wrightson, Mr Jagose contends in a series of
alternative arguments that
the defendant ought to have:

       a)      Indemnity costs totalling $63,925.10; or

       b)      Costs calculated throughout
in reliance on category 3C but increased,
               where appropriate, in order to take account of the allegedly meritless

              argument advanced by Elders;

       c)      Scale costs calculated in accordance with category 3C but increased
 
             (to a more limited extent than in paragraph (b) above) in order to take
               account of the substantial time
involved;

       d)      Scale costs calculated in accordance with category 3C but upon the
               basis that the proceeding
be treated as an application for defendant's
               summary judgment which, Elders argues, more accurately captures
    
          the nature and scope of the proceeding.


[3]    For Elders, Mr Crossland agrees that by reason of its complexity, it would
be
appropriate to place the proceeding in category 3, but he argues that the appropriate
award of costs should simply be scale costs
on a category 3B basis.


[4]    In order to place in context Mr Jagose's argument that costs should be
awarded as on a summary judgment
application, it is necessary to recount briefly the
early history of the proceeding.

[5]    It commenced on 6 April 2006 as a commercial
list proceeding to which
PGG Wrightson filed a defence on 16 May 2006, accompanied by an application for
summary judgment and a supporting
affidavit.


[6]    On 23 May 2006, Elders sought leave to bring its own application for
summary judgment and on 9 June 2006, it
filed a notice of opposition to
PGG Wrightson's application.


[7]    On 29 June 2006, PGG Wrightson filed a notice of opposition
to Elders'
application for leave. Those applications came before Harrison J on 7 July 2006.
The learned Judge thought that the most
appropriate procedural vehicle was an
application for the determination of a question pursuant to Rule 418 and accordingly
the proceeding
was set down for hearing before me on 25 August 2006 for
determination of a question agreed by counsel.


[8]    In the result, therefore,
it became possible to determine the proceeding
without reference to the competing summary judgment applications but the parties
had,
of course, incurred the prior cost of preparing and filing those applications.


[9]    In my view, the appropriate award is to be
reached by calculating steps 2 and
5.1 in the schedule at a category 3C level, with the balance to be calculated on a
category 3B
footing.


[10]   I am satisfied that the case was complex and of some significance, and
further, that an adverse outcome for PGG
Wrightson carried very serious
consequences. Moreover, there being no direct New Zealand authority on the point,
it was necessary,
as Mr Jagose points out, for the defendant's solicitors and counsel
to engage in the early stages of the proceeding in substantial and detailed legal
research, extending well beyond New Zealand authority.              A number of the
authorities cited in argument were Canadian.


[11]   In the early stages of the proceeding, therefore, there was ample justification
for PGG Wrightson to devote senior legal
resources to the issue over a relatively
extended period, so justifying a Band C classification for those early steps. The

balance
of the preparatory work and the hearing itself was relatively confined and
the factual background which provided the context for
the legal argument was
relatively simple. I do not consider an increased award of costs to be warranted,
beyond the two steps identified
above.


[12]   Mr Jagose seeks an uplift from scale for step 5.2A, from one to four days'
preparation. Rule 48C(3)(a) empowers the
Court to make such an order if:

       The nature of the proceeding or the step in the proceeding is such that the
       time required
by the party claiming costs would substantially exceed the
       time allocated under Band C ...

[13]   I take the view that the
bulk of the necessary work in this case must have
arisen in the early stages as PGG Wrightson came to grips with the issues raised
by
Elders and reviewed the law in this and other jurisdictions.          I have made due
allowance for that in assigning steps 2
and 5.1 to Band C. Beyond that, it is not
necessary to go, in my opinion.       It is important that issues of complexity and
significance
not be double-counted, both in respect of the initial classification and
then again in a subsequent uplift: Hobbs v Gilbert HC NEL
CIV 1992-442-002, 12
May 2005.


[14]   Neither do I accept that the conduct of Elders has been such as to justify an
uplift in costs.
  Mr Jagose submits that Elders' case was essentially without
substance, that its alleged lack of merit was pointed out in writing
by the defendant's
solicitors at an early time, and that the proceeding ought never have come to trial.
That being so, he contends,
there ought to be an uplift in party and party costs.
Indeed, he goes so far as to argue that this is an appropriate case for indemnity
costs
to be awarded.


[15]   I do not accept Mr Jagose's submissions.          There was no New Zealand
authority on the point raised
by the plaintiff which turned, in large part, on a
relatively complicated issue of statutory interpretation. Elders' case was by
no
means unarguable. That much is reflected in the decision of Harrison J, before the
substantive hearing took place before me, to
grant leave to the unsuccessful party to
appeal to the Court of Appeal.

[16]      Elders has raised a point of some significance
which it was entitled to refer to
the Court for resolution. There is something in Mr Crossland's argument to the
effect that it is
somewhat contradictory of PGG Wrightson to argue, on the one hand,
that the case was so complex that it ought to be assigned in toto
to category 3C for
costs purposes, and, on the other hand, to contend that it was hopeless from the
outset.


[17]      I agree with
Mr Crossland when he says that this case falls well short of that
class of "rare and exceptional" cases in which it is proper to
award indemnity costs:
see Hedley v Kiwi Co-op Dairies Ltd  (2002) 16 PRNZ 694 at [8].


[18]      Counsel were agreed that, although the hearing ultimately proceeded as a
r 418 application, costs were to be
calculated on the basis of the documents actually
prepared and filed.


[19]      In the result, I award the defendant costs against
the plaintiff totalling
$24,073.00. That figure is calculated as follows:

                          Steps                      
 Days                    Rate


          2      Commencement of Defence
                 (16 May) Band C                       
6.0

          5.1    Preparing and filing summary
                 Judgment application and
                 supporting affidavits
(16 May)
                 Band C To 31 May                       2.0________
                                                   
    8.0 $2,150             $17,200

          4.13   Preparing and filing opposition
                 To interlocutory application
for
                 Leave and supporting affidavits
                 (29 June) Band B                       0.6

          4.11
  Appearance at case
                 Management conference
                 (7 July) Band B                        0.3

       
  5.2A   Preparation for hearing of
                 defended interlocutory
                 application Band B                 
   1.0

          5.3    Arguing defended interlocutory
                 Application for sole or principal

               Counsel
(25 August)
               Band B                                1.0________
                               From 1 June         
 2.9 $2,370      $6,873
               TOTAL                                                 $24,073.00




[20]   The defendant
is also entitled to payment by the plaintiff of its proper
disbursements, to be fixed by the Registrar if necessary.




C J Allan
J