Goodwin v Rocket Surgery Limited [2013] NZHC 3052 (19 November 2013)

Last Updated: 17 December 2013

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV 2013-454-000397 [2013] NZHC 3052

UNDER Section 145 of the Land Transfer Act 1952

BETWEEN WAYNE ERNEST GOODWIN AND MARY ELIZABETH GOODWIN Applicants

AND ROCKET SURGERY LIMITED Respondent

Hearing: By memoranda

Appearances: A C Beck for applicants

D P Robinson for respondent

Judgment: 19 November 2013

_{COSTS JUDGMENT OF ASSOCIATE JUDGE ABBOTT}

This judgment was delivered by me on 19 November 2013 at 12pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors:

Jenny Beck Law, Dunedin

Gallaway Cook Allan, Dunedin

Counsel:

Andrew Beck, Greytown

GOODWIN v ROCKET SURGERY LIMITED [2013] NZHC 3052 [19 November 2013]

[1] On 13 August 2013 the respondent obtained judgment against the applicants, declining an application for an order that caveat not lapse. As part of that judgment it was awarded costs on a scale 2B basis.

[2] The respondent has presented a schedule of the costs to which it says it is entitled in terms of the order made. The applicants have disputed the following items:

(a) The costs of preparation of the respondent’s notice of opposition;

(b) A claim for a rental car and for overnight accommodation incurred as a consequence of counsel for the respondent travelling from Dunedin to Palmerston North for the hearing; and

(c) The overall quantum of costs being claimed.

[3] The applicants had also taken issue with other aspects of the schedule, but those other matters have been determined in the judgment previously released.

[4] There is also an issue between the parties over the respondent’s inclusion of an item of correspondence sent by one of the applicants to a director of the respondent. The respondent has produced that correspondence in support of its case for the costs it is seeking. The applicants claim privilege in the correspondence, and seek an order that it be removed from the Court file. It is appropriate to deal with that issue before turning to the disputed issues on costs.

The issue over privilege

[5] Counsel for the respondent attached to one of his memoranda seeking costs correspondence passing between the applicant W E Goodwin and a director of the respondent. It is not disputed that in this correspondence Mr Goodwin invited the respondent to withdraw its claims, and referred to the adverse consequence of strongly contested litigation if it did not.

[6] Counsel for the respondent relied on statements made in the correspondence to the effect that the applicants did not feel that they were getting a fair hearing on the dispute in the Dunedin Court. Counsel invited the Court to draw from these statements an adverse inference that that view, rather than the respondent’s place of residence, was the reason for the applicants bringing this application in this Court.

[7] The correspondence was headed “Without prejudice”. Counsel for the applicants submitted that it was written with a view to settlement and, accordingly, attracted privilege. The applicants ask that it be removed from the Court file.

[8] The respondent contends that the correspondence was not an offer of settlement but merely a statement of the applicants’ position coupled with a threat as to what would follow if the applicants’ position was not accepted. He submitted that it did not meet the requirements for a valid claim to privilege. Alternatively, the respondent says that even if prima facie it did attract privilege as correspondence entered into with a view to settlement, it came under a common law exception to

privilege on the basis that it cloaked “serious impropriety”¹ or “unambiguous

impropriety”².

[9] A person may claim privilege in a communication to another party to a dispute if the communication is intended to be confidential and was made in connection with an attempt to settle the dispute³.

[10] I accept that Mr Goodwin was intending his correspondence to be confidential. Although it did not contain an offer to settle in terms of a compromise, it is at least arguable that it is a communication in connection with an attempt to settle the dispute (albeit on his terms). It is significant that Mr Goodwin’s son-in- law had an interest, a factor which can support both requirements of intention to be confidential and being made in connection with an attempt to settle the dispute. I

_{find, accordingly, that it is prima facie privileged.}

¹ Sheppard Industries Ltd v Specialized Bicycle Components Inc [2011] NZCA 346, [2011] 3 NZLR

_{620 at [24] (d).}

² Forster v Friedland Unreported, Court of Appeal (England), 10 November 1992, cited with approval in Unilever PLC v The Proctor and Gamble Co [2001] 1 All ER 783 (CA).

³ Evidence Act 2006, s 57.

[11] The critical question is whether it comes within a recognised exception to the

“without prejudice” rule.⁴

[12] The Court of Appeal has recently confirmed (although in a different context, involving statements made in mediation) that without prejudice communications can be admissible in certain circumstances. It referred to, and applied to the case before it, a recent decision of the Supreme Court in the United Kingdom⁵ where Lord Clarke, who delivered the single judgment, identified nine situations where evidence of without prejudice communications was accepted to be admissible.⁶ The relevant situation for present purposes was:

(d) where the exclusion of the evidence would act as a cloak for perjury, blackmail or other serious impropriety.

[13] I have read the correspondence in issue for the purpose of resolving this point. It contains some questionable criticism of the first instance Judge and of counsel for the respondent in the hearing of the substantive dispute. However, the question should not be considered in a vacuum. There may well be a case in other circumstances for saying that exclusion of the statements would cloak serious impropriety (counsel for the respondent characterised it as “a wholly unjustified attack” on counsel and the Judge), but upholding of the privilege in this case will not cloak that serious impropriety. It remains open to the respondent or counsel for the respondent to take the matter further in an appropriate forum, where the exception may well apply. I can also determine the present application without the need to take the correspondence into account.

[14] I find, for the purposes of the present application for costs, that the applicants have privilege in the correspondence and are entitled to the protection afforded to

_{that privilege by s 57(2) of the Evidence Act 2006.}

⁴ Both statutory (s 67 of the Evidence Act 2006) and otherwise: see Sheppard, above n 1, at [15] (c)

_{and footnote 4.}

⁵ _{Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44, [2011] 1 AC 662.}

⁶ At [24].

The costs issues

(i) Preparation of the notice of opposition

[15] The respondent has claimed costs under item 38 of Schedule 3 to the High Court Rules for preparation and filing of its notice of defence. On a scale B basis, that gives a time allowance of two days. The applicants say that that amount of time is unreasonable, given that the notice of opposition was a very simple document, and that there was no supporting affidavit filed. The applicants contend that a time allowance of one day only is appropriate (that would be the time allocation if band A was applied).

[16] The time allowances in Schedule 3 of the High Court Rules are set at what is considered to be the amount of time required to take steps in a “middle of the road” proceeding. They will not always reflect the actual time expended. The schedule anticipates that a given proceeding may take more or less time. There is protection for a cost-payer in the three bands of time allocations and in the requirement that the sum awarded in accordance with scale must not exceed actual costs.

[17] Although counsel for the applicants did not explicitly invite the court to apply band A to this item, that is effectively how the applicants’ case must be viewed, involving consideration of the usual amount of time for a standard caveat proceeding (as this was).

[18] I do not accept that the applicants have made out a case for a different time banding for this step. I accept the submission of counsel for the respondent that the Court must attempt to assess this “in the round”. Although documents filed are an indicator of the work involved, their length does not necessarily reflect the complexity of the issues involved. The same applies to the applicants’ argument that no affidavit was filed. That is not necessarily an indicator of a lesser amount of time being required, and I note the argument for the respondent that consideration was given to whether an affidavit should be filed (which included the drafting of an affidavit).

[19] I also take into account that Schedule 3 no longer gives a time allocation for caveat proceedings separate from other originating applications.⁷ The present allocation for preparation of notice of opposition on a band B basis exceeds the previous allocation. That can be viewed as an indication that the previous time allocation for caveat proceedings was insufficient.

[20] One of the considerations for the standard time allocations will no doubt have been that caveat proceedings by their very nature tend to be urgent (a factor which will also be relevant to the issue over accommodation). There has been a substantial history to this matter, which will have meant that the respondent’s solicitor and counsel will have had to assess a significant amount of material to determine what would be relevant to the caveat application.

[21] The Court has an overall discretion in respect of costs, but there needs to be good reason to depart from the standard time allocations laid down in Schedule 3. I see no reason for doing so in the present case.

(ii) The claim for overnight accommodation

[22] Counsel for the applicants argued that the claim for overnight accommodation could not be justified, as the respondent could have engaged local counsel. He submitted that travelling expenses were not generally permitted as disbursements,⁸ and there were no circumstances warranting a departure from that general principle, noting that the respondent had mentioned in an earlier memorandum that a local solicitor had been instructed. He acknowledged that there

were other disputes between the parties already in the Dunedin Court, but pointed out that the applicants had brought the caveat proceeding in the Court nearest to the respondent’s place of residence, and submitted that the respondent could not justify the costs of bringing counsel from Dunedin when the proceeding had been brought

_{in “its own Court”.}

⁷ The present Schedule 3 was substituted with effect from 13 June 2012. The former Schedule 3 specifically provided for separate time allocations, and was repealed by r 5 High Court Amendment Rules 2012.

⁸ Russell v Taxation Review Authority (2000) 14 PRNZ 515 (HC).

[23] This issue has largely been anticipated in the order made that the applicants were to pay the costs of air travel, but the additional elements of that travel were not addressed.

[24] The Court has a discretion to award travelling expenses if the expense is necessary and reasonable:⁹

Finally, to qualify as a recoverable disbursement under the "other necessary payments" provision the payment must be not only reasonable but "necessary". In my view this implies two things. One is that the full amount is not recoverable where a cheaper way of doing things would not have prejudiced the proper conduct of the litigation. The costs-paying party is not required to underwrite the other party's legal services to a Rolls Royce standard. If something was sent by courier when it could have been sent or communicated by post, email or telephone, the cost is not recoverable under item 11. The other point is that it is not necessary for a successful party to pay its practitioner more than that sum which would have been upheld on a contested costs revision. This must flow through to the benefit of a costs- paying party having regard to the word "necessary" in the rules.

[25] I accept that the applicants were entitled to bring their proceeding in this Court, notwithstanding that they reside in Dunedin and the dispute concerned land at Mosgiel, and that there are extant proceedings in the Court at Dunedin in respect of the underlying dispute. Counsel for the applicants submitted that that was appropriate, notwithstanding the factors I have just mentioned which would have justified filing in Dunedin¹⁰, on the ground of urgency. However, I can and do take into account the lengthy history of the dispute (which has already been to the Court of Appeal) in which the respondent has been represented by the solicitors and

counsel in Dunedin that it has used in this application. That history justified the respondent using its existing solicitors and counsel rather than briefing local counsel in Palmerston North who would not have been as familiar with the issues in the case, or been able to address the application as comprehensively, on short notice. In that respect I note that the applicants have been represented by the same solicitors and counsel in both courts.

[26] Counsel for the applicants was also critical of the respondent for opposing the making of an interim order (and hence the perceived necessity for counsel to fly

from Dunedin to Palmerston North for the first call of the application), after the Court had informed the parties that it would make time to hear argument that day. I do not accept that there is anything in that argument. I am not convinced, given the background, that the urgent instruction of counsel in Palmerston North would necessarily have been a cheaper option, and do not regard this as a case where the applicants are having to underwrite the respondent’s costs to a Rolls Royce standard. The respondent was entitled to oppose the making of an interim order, and the outcome has confirmed that it was right to do so. I am in no doubt that the respondent would have been prejudiced in achieving that outcome by not having its regular counsel available.

[27] Based on the lengthy background to the matter, the applicants’ decision to bring the proceeding in a different venue to the venue for airings of the underlying dispute, and the potential prejudice to the respondent in not having counsel already well-versed in the dispute argue its case, I consider that the travelling expenses, including overnight accommodation, were necessary (in terms of Russell v Taxation

Review Authority),¹¹ and reasonable compared to the costs that the respondent would

otherwise have had to incur.

(iii) Overall quantum

[28] The applicants say that the respondent has not shown that the costs it is claiming are less than the costs it has incurred.¹² They say that their own costs (not disclosed in counsel’s submissions) are below those claimed by the respondent.

[29] Counsel for the respondent has confirmed (in his memorandum of 10 October

2013) that the scale costs claimed do not exceed a proper fee charged by reference to clause 9.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, and reflect a sum less than or equal to the fee properly chargeable to the respondent. I infer from this that the respondent had not been billed for the work on this application at the time of making its submission.

[30] I accept that the cost to be billed to the respondent will not be less than the amount claimed.

[31] The actual costs incurred by the applicants are not necessarily a helpful guide. The applicants have applied for legal aid, and I assume that the fees rendered to them reflect the (lower) legal aid rates.

[32] Weighing these factors I see no reason to reduce the fees claimed (according to scale) by reason of r 14.2(f) of the High Court Rules.

Decision

[33] The respondent is entitled to the items of costs as claimed. The Registrar is authorised to seal judgment for the quantum of costs sought, and for the disbursements claimed.

[34] The Registrar is to remove from the respondent’s memorandum dated 12

September 2013 the “Without prejudice” correspondence dated 29 June 2013 attached to that memorandum, and place it in a sealed envelope pending expiry of the period for appeal from this judgment. The envelope is to be returned to the applicants if no appeal is filed. If an appeal is filed, the sealed envelope is to remain on file until further order of the court.

[35] As both parties have had some success, there is no order as to costs in relation to the issues addressed in this judgment.

Associate Judge Abbott