Gauld v Waimakariri District Council [2014] NZHC 956 (8 May 2014)

Last Updated: 20 May 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2011-409-000392 [2014] NZHC 956

BETWEEN	KEITH FRASER GAULD Plaintiff
AND	WAIMAKARIRI DISTRICT COUNCIL Defendant

Hearing:	2 April 2014
Counsel:	K W Clay for Plaintiff F P Divich and A C Harpur for Defendant
Judgment:	8 May 2014

_{JUDGMENT AS TO COSTS OF WHATA J}

[1] In my judgment on this matter, I made an order for damages in favour of the plaintiff in the sum of $6,913.39 plus interest from the date of filing of the proceeding. My then tentative view was that Mr Gauld should be entitled to costs on a 2B basis, less 25% to reflect the Council’s partial success in the proceedings. In particular I found that the Council had established contributory negligence. I invited submissions on costs if they could not be agreed.

[2] I received memorandum of counsel for both parties seeking costs. Ms Divich for the defendant refers to a Calderbank offer made on 26 March 2013. In that offer, the Council proposed to pay the plaintiff $50,000. The letter provided a detailed breakdown as to the basis for the offer. The Council is to be commended for the care taken in recording the basis for settlement. An evidential issue then arose as to whether or not the offer exceeded the judgment obtained by the plaintiffs. Further memoranda were therefore sought from counsel and the matter was set down for

_argument.

GAULD v WAIMAKARIRI DISTRICT COUNCIL [2014] NZHC 956 [8 May 2014]

[3] It will be evident that the key issue is whether or not the Calderbank offer had the effect of disentitling Mr Gauld to costs in full or in part and/or entitling the Council to its costs from the date of the offer.

Summary of the parties’ positions

[4] Ms Divich and Ms Harpur helpfully produced a schedule of the respective costs assessments both in relation to scale costs and disbursements. A copy of that schedule is attached for ease of reference. The parties accept that this is an accurate reflection of the respective claims.

[5] I now turn to examine the parties’ position on liability.

Plaintiff ’s claims

[6] The plaintiff seeks costs on a scale 2B basis, with a reduction of 25% as suggested in my judgment, but applying only to costs and not disbursements.

[7] Mr Gauld submits that the plaintiff should be entitled to its scale costs on the basis that:

(a) It was successful on the critical issue of liability; (b) The Calderbank offer was feint;

(c) The Calderbank offer did not exceed the amount of the judgment obtained by the plaintiff, inclusive of a full award of costs and disbursements;

(d) In any event, the decision of the plaintiff to continue with the proceedings was reasonable in the circumstances and he ought not to be penalised for that decision.

Defendant’s position on costs

[8] The Council seeks its costs on a scale 2B basis in the High Court and disbursements from the plaintiff. The costs sought are from the date of its first “without prejudice save as to costs offer” (namely 26 March 2013) less the plaintiff’s costs at District Court scale, plus disbursements prior to 26 March 2013 less 25%. The amount that the Council seeks is $18,275.22.

[9] Ms Divich identifies three bases for the Council’s claim, namely:

(a) Before trial the Council made a Calderbank offer to resolve the plaintiff’s claim that amounted to more than the plaintiff was awarded at trial;

(b) The plaintiff succeeded in his claim for negligence only (and withdrew three other causes of action). The damages awarded were

3.5% of the amount sought. The plaintiff’s success is not a “success”

in the true meaning of the word;

(c) Establishing that the Council had caused the full amount of the remedial works claimed had been identified by it as an issue from an early stage and raised with the plaintiff. The difference in repair costs between 2005 and 2010 was quantified by the Council in October

2012 and the Council’s expert advice was provided to the plaintiff at the time.

Legal principles

[10] As I have said elsewhere¹ r 14.11 confers a general discretion on the Court to award costs. That discretion is not unfettered and should be exercised in accordance

_{with the general scheme of Part 14, particularly rr 14.2 to 14.10. When the}

1. Jones v WHK Sherwin Chan & Walshe HC Wellington CIV-2009-485-001324, [2011] NZHC 791; 25 July 2011, (2011) 25 NZTC 20-065.

discretion is exercised outside the general scheme of those rules, then it must be undertaken in a considered and particularised way.²

[11] In this case, the central issue was whether the Calderbank offer entitles the Council to its costs after the date of that offer. There are some minor issues regarding the quantum of costs which I will come to, if I get that far.

The Calderbank offer

[12] On 26 March, approximately 12 working days prior to the hearing, the Council made an offer to settle the plaintiff’s claim for the sum of $50,000 calculated as follows:³

In an attempt to avoid further irrecoverable costs being incurred, the council offers the sum of $50,000 in full and final settlement of the claim, such sum being calculated as follows:

a) Increase in cost between 2005 and 2010 (average of experts’

calculations) ........................................................................... $6,651 b) General damages ...................................................................$10,000 c) Interest on cost increase from 2010 to 2013........................... $1,232

4. Costs at District court scale (including filing memoranda and attending conferences not specifically provided for in

the cost schedule) ..................................................................$15,655

e) Disbursements (district court filing fees) .............................. $1,221 f) Expert fees (estimated) ...........................................................$15,000

TOTAL .............................................................. $49,759

BUT SAY ........................................................... $50,000

[13] This offer remained open until 4 pm Wednesday, 3 April 2013.

[14] The offer was not accepted and a second offer was made on the eve of the hearing and a final attempt to settle the proceedings for the sum of $100,000 inclusive of interest and costs. The offer was open until 5 pm Friday, 12 April 2013,

_{the same date as the offer. This offer was not accepted.}

² _{Glaister v Amalgamated Diaries Limited [2004] 2 NZLR 606 (CA) at [24]-[28].}

³ Letter from Heaney & Co to Langley Law Limited dated 26 March 2013 at [9].

[15] Rule 14.11 sets the appropriate frame in terms of the Calderbank offers. In particular r 14.11(3) states:

14.11 Effect on costs

...

(3) Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A -

(a) offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or

(b) makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.

[16] Rule 14.11(4) then states:

(4) The offer may be taken into account, if party A makes an offer that - (a) does not fall within paragraph (a) or (b) of subclause (3); and

(b) is close to the value or benefit of the judgment obtained by party B.

[17] These rules speak for themselves. They are subject, however, to r 14.11(1)

which specifies that:

(1) The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.

Assessment

[18] In order to decide whether r 14.11(3) is triggered I must first assess the amount of the judgment obtained by Mr Gauld against the Council. Mr Clay submits that the amount of the judgment sum must include any costs order that would ordinarily follow together with any disbursements to the conclusion of the hearing. He says that this is the quantum that a litigant will be comparing to a settlement offer. He says further that there can be no dispute that any final judgment sum would exceed the settlement offer of $50,000. It is conceded that the settlement offer for $100,000 may have exceeded the combined judgment and costs but that this offer was simply made too late.

[19] Ms Divich submits that this cannot be right, and that the true assessment is the quantum of the judgment combined with any likely order as to costs as at the date of the settlement offer. She says that is the true reflection of the benefit to the plaintiff of the offer had the settlement offer been accepted at that time.

[20] On this preliminary issue, I agree with the submissions of the defendant on the quantum of the judgment. The underlying purpose of r 14.11 (in combination with r 14.10) is to recognise the cost efficiencies gained by way of making offers to settle in advance of the hearing of the case. It would therefore be anomalous for a party to factor into costs that might be awarded subsequent to the offer for the purposes of assessing whether the final judgment obtained exceeded the value or benefit of the offer. In reality, any costs in fact incurred post the settlement offer would more than offset any judgment sum in any event. Therefore, the net position of the (in this case) plaintiff is at best neutral in terms of an award post settlement offer costs.

[21] I accept however the submission of Mr Clay that the second offer of

$100,000 was made too late, on the eve of the hearing, to be determinative to the costs assessment. By this stage the plaintiff was fully engaged in the hearing process and it would be unfair now to discount the plaintiff’s costs because of it. Quite appropriately Ms Divich did not strongly press me to do so.

[22] Turning then to the quantification of the judgment and its effect as at

26 March 2013; based on the schedules produced by the defendant (which, as I say, were not disputed by the plaintiff) as at 26 March 2013 the judgment sum that could have been obtained by the plaintiff ranges from $49,345.87⁴ to $40,415.74⁵ on the plaintiff’s account to $36,712.99⁶ on the defendant’s account.

[23] In terms of the plaintiff ’s figures, the lower figure reflects a deduction of 25% for the contributory negligence but includes some additional claims not included in the schedule of scale costs. The defendant’s sum simply includes the 25%

_deduction.

⁴ _{$25,870 plus $9,850.50 plus $13,625.37.}

⁵ _{$19,402.50 plus $7,387.87 plus $13,625.37.}

⁶ $17,490.75 plus $5,596.87 plus $13,625.37.

[24] It will be seen that on either analysis, the Council’s offer triggers rule

14.11(3) and certainly rule 14.11(4). I have nevertheless resolved that Mr Gauld should continue to receive at least some of his costs in these proceedings. In this regard I am guided by the Court of Appeal in Packing In Limited (In Liq) formerly known as Bond Cargo Limited v Chilcott⁷ in dealing with a previous version of this rule observed:⁸

In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.

[25] This case was factually complex, involving novel questions of law. I accept the Council’s criticism that part of the complexity was due to a wide ranging and in parts misdirected pleading. But the complexity was also a corollary of the nature of the Council’s breach and the Mr Gauld’s vulnerability to the dereliction of duty in this case. And ultimately Mr Gauld was successful in establishing that the Council breached a statutory duty and was negligent in the manner in which it failed to discharge this duty.

[26] There is then a public law element and public benefit to these proceedings against which success, and the ultimate question of costs, should be measured. In short, the resolution of Mr Gauld’s claim has brought into focus the conduct of a public authority with the result, it is assumed, that the same errors will not be repeated, to the benefit of the wider community.

[27] I am also conscious that while rejected by me, Mr Gauld might fairly have expected an award of general damages and no doubt this was a factor legitimately taken into account by him when assessing the Council’s offer to settle. Indeed the Council included a sum for general damages in its settlement offer.

[28] Accordingly, assessing the applications for costs in the round, I consider that Mr Gauld is entitled to costs on a 2B basis together with disbursements, but I increase the discount to 35 percent. This revised discount reflects a range of matters,

_{including that the Council took active steps to resolve this matter in advance of trial}

⁷ Packing In Limited (In Liq) formerly known as Bond Cargo Limited v Chilcott (2003) 16 PRNZ

_{869 (CA).}

⁸ At [5]-[6].

and its partial success. For completeness I reject Mr Clay’s submission that all disbursements should be paid by the Council. That would unfairly in my view detract from the Council’s partial success.

[29] I will leave it to the parties to agree the exact quantum. For clarity, I exclude the sums claimed by the plaintiff for memoranda as to costs, but otherwise approve the other steps as fairly claimed.

[30] While considerable effort was put into the applications for costs, I make no further award of costs. This process was a necessary incident of the primary hearing process and the submissions for both parties were fairly made.

Solicitors:

Landley Law Limited, Christchurch

Heaney & Partners, Auckland