Harper v Beamish [2012] NZHC 554 (27 March 2012)

Last Updated: 12 April 2012

JUDGMENT OF 27 MARCH 2012 RECALLED AND REISSUED

_{4 APRIL 2012}

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2009-441-000636 [2012] NZHC 554

BETWEEN MELANIE JOY HARPER First Plaintiff

AND CLAIR FIONA MACINTYRE Second Plaintiff

AND CLAIR FIONA MACINTYRE AND ARTHUR JACK SMITHWICK HARPER AS TRUSTEES OF THE C F ENGELS TRUST

Third Plaintiffs

AND DOROTHY JOY BEAMISH, SIMON NOEL BEAMISH AND GRAHAM CAMERON EDWARDS AS TRUSTEES OF THE AWAPAI TRUST

Defendants

Judgment: 27 March 2012

Judgment reissued: 4 April 2012

JUDGMENT OF GENDALL J AS TO COSTS

[1] In my reserved decision delivered on 8 December 2011 entering judgment for the defendants the question of costs was reserved.

[2] The defendants now seek costs and I have considered the memorandum of their counsel dated 13 March 2012 and the response by counsel for the plaintiffs

_{dated 23 March 2012.}

HARPER v BEAMISH HC NAP CIV-2009-441-000636 [4 April 2012]

[3] The defendants seek costs on a category 2B basis for the period up to

5 September 2011. That represents $13,700. For the period from 5 September 2011 until the completion of the trial the costs on an indemnity basis are sought. They total $44,848.82.

[4] In addition, witness expenses of $4,892 are sought being a fee for professional services rendered by the accountancy company, Graham Edwards Ltd, representing Mr Edwards a trustee, and accountant for the defendant trust who gave evidence.

[5] There can be little dispute over costs on a category 2B scale being awarded, there being no reason why the usual consideration of “costs follow the event” being adopted. The issue is whether indemnity costs should be ordered, or alternatively an uplift of 50 per cent over scale, for the period after 5 September 2011.

[6] Counsel for the defendants submit that the plaintiffs acted unnecessarily in issuing and continuing the proceeding, which counsel submits was “a hopeless case”. He says that, on 5 September 2011 the solicitors for the defendants wrote a letter to the solicitors for the plaintiffs contending that the plaintiffs’ case “appears to be totally misconstrued”, which was confirmed by advice from two Queen’s Counsel. The letter goes on to say:

Against that background we invite your clients to consider their position carefully and discontinue the case. If your clients proceed with the case and fail (which is the likely outcome) we will table this letter with the Judge and ask for costs of hearing and preparation on an indemnity basis.

[7] Counsel submits that the defendants had been put to substantial costs to defend a claim which should not have been brought. Relying on the authority of Bradbury v Westpac Banking Corporation1 indemnity costs for the period after

5 September 2011 totalling $44,848.82 should be awarded.

[8] Rule 14.6 provides that, despite the adoption of the normal principles for fixing costs, the categorisation of proceedings, and determining of reasonable time

1 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

(rr 14.2, 14.3, 14.4 and 14.5), the Court may make an order increasing the costs payable or order indemnity costs.

[9] Rule 14.6(4) provides that the Court may order indemnity costs if a number of circumstances exist. The only relevant ground advanced in this case is under r 14.6(4)(a):

the [plaintiffs have] acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding;

...

[10] Indemnity costs should only be awarded if a party has behaved badly or very unreasonably. I do not think that that applies in this case. Of course, the plaintiffs failed in their action. The defendants, in a sense, put the plaintiffs on notice that they would fail. But that alone would not justify awarding indemnity costs. The plaintiffs had solicitors and counsel acting for them and unquestionably had been advised that they were entitled to proceed with their claim in the expectation that they might succeed. The plaintiffs gave evidence and impressed as genuine in their belief that they had a good claim – even if it turned out to be the case that that belief was misguided. They no doubt followed advice and could not be said to be vexatious. Wrong, yes, but not unreasonable to the extent required to justify an order for indemnity costs against them.

[11] As to the issue of increased costs: r 14.6(3) sets out various considerations that the Court must take into account in determining whether or not to exercise its discretion to pay increased costs. In this case the only relevant provisions are contained in r 14.6(3)(b)(ii) and possibly, (v). Those provisions provide:

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—

...

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

...

(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;

...

[12] Counsel for the defendants seek an uplift of 50 per cent over the scale for costs for the period after 5 September 2011. This would provide for an additional

$6,862 resulting in a total award of costs for that period, based upon a 2B basis and the 50 per cent uplift, of $20,586.

[13] Simply because a party fails cannot without more result in a finding that they took or pursued an argument that lacks merit so as to require an uplift from scale costs. Much depended upon the evidence that was given, and was yet to be given, leading to the final outcome of the plaintiff’s case. Whilst it, in the end, failed and was held to be without merit – and on one view was doomed – I do not consider the plaintiffs to have acted in a way which justifies an increase of costs over scale being made against them. Whilst the plaintiffs failed, their belief that there were proper issues to contest, and advance, was not so unreasonable so as to mulct them with increased costs and they will pay quite substantially for the failure of their claim. As it turned out, it would have been better for them to have settled, although it is not disclosed to the Court what any settlement offer was. But I am not satisfied that this is a case where the individual plaintiffs should be ordered to pay costs in excess of that which is provided for in the scale, which applies in normal circumstances.

[14] The solicitors’ fees of S J Scannell & Co totalling $6,703.35 (inclusive of

GST) and disbursements $321.80 (inclusive of GST) for the period 6 November

2011 to 6 December 2011 fall within the award of scale 2B costs (apart from the disbursements). They are not to be the subject of any increase.

[15] Turning to the claim for witness expenses of $4,892 for Mr Edwards. The fee rendered to the trust by his firm was $4,800 plus disbursements (printing, copying, mileage and tolls) $92 and counsel claim this as witness expenses.

[16] There is no longer any provision in the High Court Rules setting out quantum of witness expenses, and they now come under the “disbursements” rule, r 14.12. Witnesses’ expenses, including the fees of expert witnesses are disbursements.2

What is reasonable will be a question of fact for the assessment of the Judge, Associate Judge or Registrar in any individual case.

[17] Mr Edwards’ claim, through his company, is put forward on the basis of him being an expert. He gave evidence as a defendant trustee and also as the accountant adviser to the Trust. His evidence was not of an expert nature. He gave evidence as to narrative and his evidence was simply on matters of fact. He is of course entitled to charge the trust or trustees for his professional services and that is what the account appears to relate to, as it is described as “consulting services”. Whilst the Trust unquestionably must pay the account it is not appropriate that the plaintiffs be liable for it as an approved witness disbursement. Mr Edward’s attendance in Court and his giving of evidence was necessary, and I am prepared to allow disbursements of $600 to cover that expense and limited involvement.

[18] As to Category 2B quantum. I agree with the plaintiffs’ counsel that the claim for four case conferences memoranda is too high. I allow a total of $1,000 for item 4.10.

[19] It follows that costs on a category 2B basis are awarded in the total sum of

$28,460, representing 2B scale costs up to 5 September 2011 $11,164 and thereafter,

$17,296. Disbursements that are approved are the solicitor’s disbursements of S J Scannell & Co of $321.80 less GST and of Mr Edwards (printing and copying, mileage and tolls) $92, in addition to a witness fee of $600.

[20] I decline to make any further costs order – in favour of any party – as it relates to this application.

Solicitors:

Macalister Mazengarb, Wellington for Plaintiffs

S J Scannell & Co, Hastings for Defendants

J W Gendall J

2 Progressive Enterprises Ltd v North Shore City Council [2005] NZHC 475; (2005) 17 PRNZ 919 (CA).