Marine & General Engineering Ltd v Harpur HC Nelson CIV-2010-442-000356 [2011] NZHC 698 (30 June 2011)

Last Updated: 25 July 2011

IN THE HIGH COURT OF NEW ZEALAND
NELSON REGISTRY

CIV-2010-442-000356

BETWEEN MARINE AND ELECTRICAL ENGINEERING (NELSON) LIMITED
Plaintiff

AND CRAIG ALBERT HARPUR trading as DHF CHARTERS FIORDLAND
Defendant

Costs
Judgment: 30 June 2011

Counsel: T M Sawtell for Plaintiff
P B McDonald for Defendant

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COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

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[1] On 3 December 2010 this Court directed that this proceeding be transferred to the Disputes Tribunal. The reasons for this decision are set out in detail in the Minute of Associate Judge Osborne of that date. Costs were reserved. The Court has now received a memorandum from the plaintiff seeking costs, and a memorandum from the defendant in reply.
[2] The plaintiff seeks indemnity costs, or alternatively increased costs, or in the alternative again, scale costs against the defendant.

Indemnity Costs

[3] The plaintiff relies on r.14.6(4)(a) and (4)(f) and drew my attention to Bradbury v Westpac Bank Incorporation.[1] Counsel relied on the following passages from that judgment, drawn from a judgment in Colgate-Palmolive Co v Cussons Pty Ltd:[2]

I believe that it is appropriate to consider awarding ‘Solicitor and Client’ or ‘Indemnity’ costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.

[4] And further:

It is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient in my opinion to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.

[5] Counsel then presented a summary of circumstances in which indemnity costs have been ordered.
[6] The plaintiff appeared to be fortified in its view that it should seek costs on this basis by the fact that when the matter was heard in the Disputes Tribunal, and full evidence was considered by the referee, the plaintiff succeeded, and the defence which had been put forward in response to the plaintiff’s application for summary judgment in this Court, was rejected. However, the issue before this Court on costs relates to the proceedings brought in this Court. The ultimate outcome of the case, after a defended hearing in the Disputes Tribunal tested on oral evidence, is of scant relevance. On an application for summary judgment in this Court it is for the plaintiff to show that the defendant does not have a defence to the claim. The onus of proof, throughout, is on the plaintiff, though if the defendant maintains that it has a defence it is for the defendant to lay a proper evidentiary foundation for that allegation.
[7] In this case, the defendant and the plaintiff presented different evidence on exactly what occurred at the time the cause of action arose. Associate Judge Osborne in his Minute dated 3 December 2010 made the following observation:

[10] Prior to the hearing, counsel for the plaintiff filed a synopsis of argument in which it was suggested that the defendant’s allegations are not credible. Without reaching a concluded view on the level of credibility, it is sufficient for today’s purposes to observe that without seeing and hearing the relevant witnesses it is difficult to envisage how the Court in a summary context could properly draw the conclusion that the defendant did not receive the assurance which he alleges he received.

[8] Before the summary judgment proceedings were issued there was correspondence between the solicitors for the parties. The defendant has now produced, in relation to costs, a letter written by his solicitors and marked “Without Prejudice Except as to Costs” which summarised the defence and made a settlement offer in the sum of $7,500, without prejudice except as to costs.
[9] The defendant also produced to me a further letter written by his solicitors dated 28 October 2010 noting that “It is evident from our client’s Affidavit that the debt is in dispute” and expressing surprise that an application for summary judgment had been made given previous correspondence. No doubt that was a reference to the fact that the defence had already been spelled out clearly in the letter of 25 March 2010. The letter went on to suggest that the appropriate forum for the matter to be determined was the Disputes Tribunal and advised that if the plaintiff proceeded with the summary judgment application the defendant intended to apply to have the matter referred to that Tribunal. If that were not consented to an application for costs would be made to this Court.
[10] Against this factual background the plaintiff’s application for indemnity costs is fundamentally misconceived. The fact that after a hearing on oral evidence in the Disputes Tribunal the plaintiff ultimately succeeded has no bearing on whether the plaintiff should have commenced or continued with an application for summary judgment in this Court when it was on full notice of the defence, and, after affidavits were filed, was well aware of a conflict of evidence given by way of affidavit. It is trite to state that this Court can rarely determine issues of fact on conflicting affidavits; the circumstances where that may occur are discussed in a number of cases but none appear relevant here. Indeed, by reference to the passages quoted above, this was, arguably, an application for summary judgment where the plaintiff “should have known that [it] had no chance of success” or a case where the plaintiff persisted “in what should on proper consideration be seen to be a hopeless case”. I stop short of so finding but firmly reject the plaintiff’s application for indemnity costs.

Increased costs

[11] On this point counsel submitted that increased costs are appropriate where the actions of a party have unwarrantedly increased the costs, in time and money, of the Court and other parties – r.14.6(3)(b). Counsel said that “this is what happened in this case by the defendant persisting in his groundless claims against the plaintiff and refusing to accept that full payment of the account was required.”
[12] The defendant was entitled to present his defence to this Court, and did so. That defence had been notified to the plaintiff well before the proceedings were issued and was maintained before the Disputes Tribunal. I see nothing in the defendant’s conduct that amounts to an unwarranted action leading to increases in costs incurred. The costs incurred by both parties in this matter result from the plaintiff having ignored the defendant’s assertions and opted to pursue an application in this Court which is only available where the plaintiff can establish that there is no arguable defence. The fact that there was a conflict in relation to the respective versions of events should have been sufficient to put the plaintiff on due notice that this proceeding was unlikely to be suitable for an application for summary judgment, given the evidentiary burden on the plaintiff.
[13] This case falls well short of one where an award of increased costs should be made.

Scale costs

[14] The plaintiff sought scale costs. The only basis on which this could be justified is that, ultimately, it succeeded. However, it did so after an adjudicator made a determination after hearing oral evidence, a course not open to this Court on an application for summary judgment.
[15] In my judgment this proceeding should have been commenced in the Disputes Tribunal in the first place, given the amount in issue and the known evidentiary conflict in relation to material events which required determination on oral testimony. I decline to award costs to the plaintiff.

Costs to the defendant?

[16] The defendant did not apply for costs on the summary judgment or substantive proceeding. With full argument this may have been a case where the defendant would have been awarded costs, notwithstanding the outcome in the Disputes Tribunal after oral testimony. The observations I have made above support this prospect. Overall, however, I am satisfied that costs should lie where they fall.

Costs on this application

[17] The defendant has succeeded on this application and is entitled to costs. I award to the defendant costs on a 2B basis on the plaintiff’s application for costs.

Final observation

[18] The plaintiff has failed in its claim for costs, and I record considerable concern that both the defendant and the Court have been required to expend time in relation to applications for indemnity costs and increased costs which were in my judgment manifestly inarguable on any reasonable level of analysis. Such applications should be brought only when, after careful consideration and analysis, there is an arguable case that such costs are justified and might properly be awarded. For the reasons outlined, it does not appear that this occurred in this case.

J G Matthews
Associate Judge

Solicitors:
C & F Legal, PO Box 1049, Nelson. Fax: [phone] for Plaintiff
Cruickshank Pryde, PO Box 857, Invercargill. Fax: [phone] for Defendant

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[1] Bradbury v Westpac Bank Incorporation [2009] 3 NZLR 400 (CA).

[2] Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; [1993] 46 FCR 225.