NANDRO HOMES LIMITED AND ORS V DATT HC AK CIV-2008-404-006676 [2009] NZHC 807 (13 July 2009)

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                             
 CIV-2008-404-006676

                UNDER                             the District Courts Act 1947

                IN THE MATTER
OF                  an appeal under Section 72 of the District
                                                  Courts Act 1947
from the whole of the
                                                  decision of the District Court at Manukau
              
                                   under CIV-2007-092-654 dated 11
                                                  September 2008

                BETWEEN                           NANDRO HOMES LIMITED
                                                  First Appellant

                AND                               DEO SHARAN SINGH
                                                  Second Appellant

                AND                               ROHIN NISHA KHALIL
                                                  Third Appellant

                AND                               MEENA DATT AND BABU SANGEEN
                                                 
DATT
                                                  Respondents


Hearing:        Determined on the Papers

Judgment:       13
July 2009 at 3:00 pm


                         COSTS JUDGMENT OF ASHER J


               This judgment was delivered by me on 13
July 2009 at 3:00 pm
                       pursuant to Rule 11.5 of the High Court Rules

                             ...............................................
                                   Registrar/Deputy Registrar

                             ...............................................
                                                  Date

Solicitors:
PA Fuscic, McVeagh Fleming, Auckland
Berman and Burton, Ellerslie,
Auckland




NANDRO HOMES LIMITED AND ORS V DATT HC AK CIV-2008-404-006676 13 July 2009

[1]      On 16 March 2009 I allowed an
appeal against a refusal to enter summary
judgment for the appellants against the claim in the District Court of the respondents.
As a consequence I entered summary judgment for the defendants in the District
Court proceedings, Nandro Homes Limited ("Nandro"),
against the plaintiffs, Meena
Datt and Babu Datt ("the Datts"). I indicated that the successful appellants, Nandro,
were entitled
to costs on a 2B basis, but made no order, directing that if orders were
sought that the parties should file submissions.       
 I have now received those
submissions.


[2]      The successful appellant, Nandro, sets out in its submissions the amount of
the
costs in the District Court and the High Court on a 2B basis, but only as a starting
point. It states that its actual costs in relation
to the two hearings were $59,123.79,
being $31,303.20 for the District Court and $27,820.59 for the High Court. It seeks
indemnity
costs, submitting that the Datts had attempted to re-litigate the outcome of
earlier proceedings in a way that was improper and unnecessary.
Nandro says that
the application could never have succeeded.


[3]      Further, Nandro relies on an additional feature, being the
"imprudent refusal"
of the respondents to heed a detailed letter dated 16 January 2008 ("the letter") sent
by the appellants' solicitors
at the time of the issue of the proceedings, stating that
there had been a full and final settlement of the earlier proceedings,
and setting out
why the Datts could not succeed. Nandro submitted that the fact that the Datts
continued with the claim despite this
was a further basis for the award of indemnity
costs.


[4]      The Datts, while accepting the underlying principle that a successful
litigant
should receive a contribution towards its costs, submitted that Nandro did not act in
good faith in the events that lead
to the original proceedings. The Datts submit that
this was a situation where there were different views that could reasonably be held,
and that the letter could be regarded as little more than "sabre rattling". They submit
that the Datts were successful
in the District Court and should have costs in the
District Court, despite the successful appeal. They also submit that there was
a
significant public interest factor in the case, given that it was a proceeding to recover

compensation for dishonesty. It was
submitted that the public interest was served by
the case sending a "clear message to the appellants and to future victims".


Discussion


[5]    As I indicated in my judgment, Nandro was successful, and in the ordinary
course of events the Datts should pay costs on
a 2B basis. They should have failed
also in the District Court, and for that reason costs should be payable by the Datts to
Nandro
in that Court. There was no particular feature about the case in terms of the
work that had to be done or the difficulty of preparation
which would warrant a scale
other than 2B.


[6]    The issue is whether the rule that the party who fails should pay costs to the
party who succeeds, as set out in r 14.2(a), should be departed from.


[7]    I consider first Nandro's argument. Should increased
costs or indemnity
costs be ordered under r 14.6? Under r 14.6(3)(b)-(d) the Court may order a party to
pay increased costs in certain
circumstances:

       14.6      Increased costs and indemnity costs

       ...

       (3)       The court may order a party to
pay increased costs if--

       ...

       (b)       the party opposing costs has contributed unnecessarily to the time or
   
             expense of the proceeding or step in it by--

                 (i)     failing to comply with these rules or with a
direction of the
                         court; or

                 (ii)    taking or pursuing an unnecessary step or an argument
that
                         lacks merit; or

                 (iii)   failing, without reasonable justification, to admit facts,
                         evidence, documents, or accept a legal argument; or

                 (iv)    failing, without reasonable
justification, to comply with an
                         order for discovery, a notice for further particulars, a notice
      
                  for interrogatories, or other similar requirement under these
                         rules; or

           
  (v)     failing, without reasonable justification, to accept an offer of
                      settlement whether in the form of
an offer under rule 14.10
                      or some other offer to settle or dispose of the proceeding; or

       (c)    the
proceeding is of general importance to persons other than just the
              parties and it was reasonably necessary for the
party claiming costs
              to bring it or participate in it in the interests of those affected; or

       (d)    some other
reason exists which justifies the court making an order
              for increased costs despite the principle that the determination
of
              costs should be predictable and expeditious.

[8]    Under r 14.6(4) indemnity costs may be ordered if:

      
       (a)     the party has acted vexatiously, frivolously, improperly, or
                      unnecessarily in commencing, continuing,
or defending a
                      proceeding or a step in a proceeding; or

              (b)     the party has ignored or disobeyed
an order or direction of
                      the court or breached an undertaking given to the court or
                      another
party; or

              (c)     costs are payable from a fund, the party claiming costs is a
                      necessary party
to the proceeding affecting the fund, and the
                      party claiming costs has acted reasonably in the proceeding;
                      or

              (d)     the person in whose favour the order of costs is made was
                      not
a party to the proceeding and has acted reasonably in
                      relation to it; or

              (e)     the party claiming costs is entitled to indemnity
costs under
                      a contract or deed; or

              (f)     some other reason exists which justifies the court
making an
                      order for indemnity costs despite the principle that the
                      determination of costs
should be predictable and
                      expeditious.

[9]    I deal with indemnity costs first. Such costs will only be ordered
where truly
exceptional circumstances exist: Hedley v Kiwi Co-operative Dairies Ltd  (2002) 16
PRNZ 694 at 18. The fact that an unsuccessful party has been shown to have no
seriously arguable case does not mean that the party has acted
vexatiously,
frivolously, improperly, or unnecessarily in terms of r 14.6(4)(a). The lack of a
seriously arguable case is not a truly
exceptional factor. Litigants frequently have a
sincere belief that they have a claim or defence which they should pursue, but find
when they go to Court that their case cannot possibly succeed. This is not an
unusual circumstance. It should not be regarded as
extraordinary in the litigation

context that parties pursue claims that fail by a substantial margin. The litigation
process provides
a forum for them to pursue such claims, and there are procedures
such as the summary judgment procedure designed to constrain the
pursuit of such
actions. It is the function of our civil litigation system to allow parties to air such
grievances. Summary success
or failure cannot be regarded as truly exceptional.


[10]    If proceedings are capricious or absurd, that may make them truly
exceptional,
and warrant an order of indemnity costs. But these proceedings did not
have that flavour. After all, the Datts persuaded the District
Court Judge that there
was a seriously arguable case. The fact that there was an attempt to re-litigate a
settled proceeding might
be relevant to indemnity costs, if it had an element of
flagrancy or capriciousness, but this case did not have that quality.   
          In the
circumstances, I am not prepared to award indemnity costs.


[11]    I turn to the issue of increased costs. There
has been no significant failure to
comply with rules or directions, or to comply with orders or notices in terms of
r 14.6(3)(b)(i)
and (iv). In one sense there has been the pursuit of an argument that
lacks merit in terms of r 14.6(3)(b)(ii), and a failure to
accept a legal argument
without reasonable justification in terms of r 14.6(3)(iii), in that the Datts have failed
to show that their
legal and factual arguments are seriously arguable. However,
something more than mere failure of a factual or legal argument is necessary
for
there to be increased costs. The requirement of r 14.6(3)(ii) and (iii) is for there to
be a lack of merit, or a failure to accept
legal argument without reasonable
justification.


[12]    I am not satisfied that the Datts' failure to succeed was by a sufficiently
wide
margin to warrant an order for increased costs for that reason only. As I have stated,
their argument was persuasive enough
to prompt the District Court Judge to refuse
Nandro's application for summary judgment.


[13]    The letter that was sent on behalf
of Nandro by its lawyers, seeking to
persuade the Datts to drop the second proceedings, was a detailed and intelligent
letter, sent
for the justifiable purpose of trying to stop the litigation at that point and
save further costs. However, it was not a Calderbank
letter. No offer was made

which was later vindicated by the quantum of damages, as occurs when orders are
made on the basis of
a Calderbank letter. Rather, one party stated, as parties often
do at the outset of proceedings, that it considered the other side's
case to be hopeless.
I do not consider that the sending of such a letter is a circumstance warranting a
departure from the usual
rule as to costs. It does not constitute a failure to accept an
offer of settlement under r 14.6(3)(b)(v).


[14]   Further, although
there were fraud allegations which were dismissed in these
proceedings, that was because the conduct complained of was that settled
in the first
proceeding. It is not possible to say in this proceeding whether allegations made in
that first proceeding were baseless
or not.        The Court does not have enough
information to reach any conclusion on this. The fact that they were repeated in the
second case is not enough to warrant an award of extra costs.


[15]   However, there is a factor touched on in submissions which
does warrant
further consideration. The parties had entered into a detailed settlement, where they
both had legal advice. I have found that it was intended
to be a full and final
settlement of all matters.    The settlement resulted in the discontinuance of the
proceeding. The Datts then
wrongly attempted, I have found, to relitigate the settled
issues. My impression is that they have acted with sincerity and without
any ulterior
motive in doing so. Nevertheless, their actions have meant that a matter that has
already been through a Court process,
and should have ended, has continued.


[16]   The issue of proceedings has meant that there was not finality in the litigation
as
there should have been. The refusal to accept the settlement and discontinuance
of proceedings, and the effective re-opening of them,
is a particular factor in terms of
r 14.6(3)(d). It is a reason which justifies the Court making an order for increased
costs, despite
that principle that the determination of costs should be predictable and
expeditious. Given the fact that the Datts' arguments had
sufficient cogency to
persuade the District Court Judge of their correctness, and their sincerity and the lack
of any ulterior motive,
I do not propose awarding indemnity costs. However, I do
propose increasing the costs by the sum of $7,000 to mark the fact that
this was a
futile attempt to relitigate a matter already settled within the Court processes.

[17]   I turn to the arguments raised
by the Datts for costs in their favour. The fact
that they succeeded in the District Court does not mean that they should be entitled
to costs in that Court. I found when I allowed the appeal that the decision reached in
the District Court was wrong. The application
for defendants' summary judgment
should have been allowed at that point, and the proceedings should have ended at
that point. The
Datts must take responsibility in costs terms for that hearing as well
as the appeal. The principle that the unsuccessful party should
pay the costs of the
successful party must extend back to an earlier hearing where a party was
temporarily successful, but ultimately
has failed on appeal.


[18]   Accordingly, costs should be payable in those proceedings on a District Court
2B basis.


[19]   In
relation to the High Court proceedings and indeed the proceedings as a
whole, I cannot accept the Datts' argument that there was
some public interest factor
or matter of general importance to persons other than the parties in terms of
r 14.7(e). There is nothing
before me which would warrant a conclusion that there
was some fraudulent act or other act of impropriety on the part of Nandro that
warranted the issue of the proceedings, and, in any event, that claim, which I have
found included a dishonesty allegation, was settled.
Even if there was any cogent
evidence of such fraud or impropriety, it would have been personal to the Datts and
would not have been
of general importance.


[20]   I therefore reject the argument that the costs payable by the Datts should be
reduced because of
a public interest factor or general importance.


[21]   Accordingly, I order that costs are payable on a 2B basis in relation to
both
the District Court and High Court proceedings.


[22]   In addition I direct that a further $7,000 of costs are to be paid.
I am in a
position to give the exact figures for the costs, as these do not appear to be in
dispute:

         a)     The costs
in the District Court are to be a total of $5,054 for costs and
                disbursements, as set out in paragraph 6 of the appellants'
                memorandum filed in support of the application as to costs.


         b)     The costs in the High Court are to
be a total of $5,933.15 including
                disbursements, as set out in the same memorandum.


Result


[23]     I order that
the respondents pay the appellants' costs of $5,054 in the District
Court and $5,933.15 in the High Court, together with a further
sum of $7,000.


[24]     Neither party has fully succeeded in its arguments for orders beyond what
would be usual under the scale, and therefore I do not
propose making any order for
costs in relation to the arguments I have received on this application.




                       
                                      ................................
                                                         
                         Asher J