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High Court of New Zealand Decisions |
Last Updated: 27 October 2015
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2013-470-569 [2015] NZHC 2451
BETWEEN
|
IAN RODNEY RENNER
Plaintiff
|
AND
|
CATHERINE MARY RENNER First Defendant
IAN LUKE DUSTIN Second Defendant
|
Hearing:
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(On the papers)
|
Counsel:
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C T Gudsell QC for Plaintiff
W T Nabney for First Defendant
|
Judgment:
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7 October 2015
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JUDGMENT OF BREWER J (Costs)
This judgment was delivered by me on 7 October 2015 at 5:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Mackenzie Elvin (Tauranga) for Plaintiff
Lyon O’Neale Arnold (Tauranga) for First Defendant
(Copy to Second Defendant in person)
RENNER v RENNER [2015] NZHC 2451 [7 October 2015]
Introduction
[1] In my judgment delivered on 11 June 2015, I held that
the plaintiff, Mr Renner, was successful in his claim
for contribution against
the first and second defendants, Mrs Renner and Mr Dustin respectively, as
co-guarantors.1
[2] I omitted, however, to deal with Mr Renner’s claim
for interest on the judgment sums. Mr Renner and Mrs
Renner agree that
interest has accrued on the judgment sums but they disagree on the date from
which the interest accrues. This
judgment deals with that issue.
[3] Mr Renner also seeks increased costs under r 14.6(3)(b)(v) of the
High Court
Rules on the basis of a “without prejudice save as to costs”
settlement offer dated
12 May 2015 (“the Settlement Offer”). This judgment
deals also with that
application.
Issues
[4] Accordingly, the issues that I must address are:
(a) On what date did interest on the contribution begin to accrue?
(b) What are the costs and disbursements to which Mr Renner is entitled on a
2B basis?2
(c) Is Mr Renner entitled to increased costs?
On what date did interest on the contribution begin to
accrue?
Principles
[5] A guarantor can recover interest from his co-guarantor on the sum due for contribution. It is a well-established principle that the interest is calculated from the
date on which the guarantor’s payments exceed the
guarantor’s proportionate share
1 Renner v Renner [2015] NZHC 1315.
2 The basis on which I awarded costs.
of the common liability.3 Where one guarantor overpays the debt
in excess of his fair share, there is an implied contract between all the
co-guarantors to indemnify
the overpaying guarantor for the amount which he paid
in excess of his obligation. An award for contribution is in the nature of
contractual damages and so requires the other co-guarantors to put the
overpaying guarantor in the same position he would have been
in if the other
co-guarantors had honoured their obligations to guarantee the
debt.4
The parties’ submissions
[6] Mr Gudsell QC submits that Mr Renner is entitled to
interest on the contributions recoverable from Mrs Renner
and Mr Dustin from
12 October 2011, being the day after Mr Renner paid $1,320,000 to FM Custodians
Ltd pursuant to the guarantee.
[7] Mr Nabney accepts that Mr Renner is entitled to interest on the contributions. But he submits it would be inequitable to require the payment of interest from the date the payment was made. This is because the payment on that date was not made by Mr Renner himself, but rather by the Ian Renner Trust (“the Trust”) which lent the money to Mr Renner. In his submission, Mr Renner merely swapped one debt for another. Instead, Mr Nabney says it would be appropriate to require the payment of interest from the date that the proceedings against Mrs Renner were issued, that date being 9 October 2013. In making this argument, Mr Nabney relies on the decision of this Court in Trotter v Franklin in which Tipping J awarded interest from
the day in which proceedings were
brought.5
3 In re Fox, Walker, & Co, ex parte Bishop (1880) 15 Ch D 400 (EWCA) at 422; Davies v
Humphreys [1840] EngR 223; (1840) 6 M&W 152, 151 ER 361; Lawson v Wright (1786) 1 Cox Eq Cas 275, 29
ER 1164; Hitchman v Stewart [1855] EngR 479; (1855) 3 Drew 271, 61 ER 907; Re Swan’s Estate (1869) 4 Ir Eq
209. See also Geraldine Andrews QC and Richard Millet QC Law of Guarantees (6th ed, Sweet
& Maxwell, London, 2011) at [12-014]; JC Phillips The Modern Contract of Guarantee (2nd
English Ed, Sweet & Maxwell, London, 2010) at [12-247]; Halsbury’s Laws of England (5th ed,
2008) vol 49 Financial Services and Institutions at [1171].
5 Trotter v Franklin [1991] 2 NZLR 92.
Discussion
[8] The principle is well-established: interest is calculated
from the date on which the payment in excess of the
guarantor’s
obligation is made. There is no discussion in Tipping J’s judgment in
Trotter v Franklin as to why interest began to run on the day on which
proceedings were brought rather than on the day on which the overpayment was
made.
That decision runs against clear authority. Furthermore, I agree with Mr
Gudsell’s submission that the fact that the payment
was made with money
lent to Mr Renner by the Trust is irrelevant. Mr Renner incurred a debt in
order to pay the guaranteed amount
on 12 October 2011. I find that interest
began to run on 12 October 2011.
[9] Mr Renner seeks interest at 5 per cent per annum, which reflects the prescribed rate as set by the Judicature (Prescribed Rate of Interest) Order 2011, for the period 12 October 2011 to the date of judgment.6 Calculating interest from
12 October 2011 to the date of judgment (11 June
2015):7
(a) Mrs Renner’s liability to pay interest is $34,160.00 on the sum
of
$186,666.67.
(b) Mr Dustin’s liability to pay interest is $103,700.00 on the sum
of
$566,666.67.
[10] In the event that Mr Renner is entitled to an increased contribution from Mrs Renner due to an inability to recover against Mr Dustin, then Mrs Renner’s liability will increase accordingly. But Mrs Renner cannot be obliged to pay more
than $86,010.00 in
interest.
6 Judicature Act 1908, s 87.
7 There were 1338 days between 12 October 2011 and 11 June 2015. Mrs Renner and Mr Dustin must pay a total of 18.3 per cent interest on the respective sums that they owe to Mr Renner ((0.05/365) x 1338 = 0.183).
What are the costs and disbursements to which Mr Renner is entitled on a 2B
basis?
[11] In my judgment, I awarded Mr Renner costs against Mrs
Renner and Mr Dustin on a 2B basis. Having considered the
parties’
submissions, I set out the costs and disbursements to which Mr Renner is
entitled in the paragraphs that follow.
[12] Mrs Renner and Mr Dustin are jointly and severally liable8
for the following costs:
Description
|
Time allocation
|
Amount (@ $1,990 per day)
|
Commencement of proceedings by plaintiff
|
3
|
$5,970.00
|
Reply
|
0.8
|
$1,592.00
|
Preparation for first Case Management
Conference
|
0.4
|
$796.00
|
Filing memorandum for first or subsequent case
management conference or mentions hearing on
24 April 2014, 23 June 2014, 25 July 2014,
8 December 2014 and 10 December 2014
|
2
|
$3,980.00
|
Appearance at first and subsequent case
management conferences on 30 April 2014,
25 June 2014 and 10 December 2014
|
0.9
|
$1,791.00
|
List of documents on discovery
|
2.5
|
$4,975.00
|
Inspection of documents
|
1.5
|
$2,985.00
|
Plaintiff ’s preparation of briefs
|
2.5
|
$4,975.00
|
Plaintiff ’s preparation of list of issues,
authorities and common bundle
|
2.5
|
$4,975.00
|
Preparation for hearing
|
3
|
$5,970.00
|
Appearance at hearing
|
2.5
|
$4,975.00
|
Sealing judgment (@ 2,330 per day)9
|
0.2
|
$116.50
|
Total
|
$43,100.50
|
[13] Mrs Renner is individually liable for the following additional
costs:
Description
|
Time allocation
|
Amount (@ $1,990
per day)
|
Preparation of written submissions for
interlocutory hearing on 23 July 2014
|
1.5
|
$2,985.00
|
Appearance at hearing of defended application
for sole or principal Counsel at hearing on
23 July 2014
|
0.25
|
$497.50
|
Total
|
$3,482.50
|
8 High Court Rules, r 14.14.
9 The daily recovery rate was increased prior to the judgment
being sealed.
Description
|
Time allocation
|
Amount (@ $1,990 per day)
|
Filing memorandum dated 29 April 2015
|
0.2
|
$398.00
|
Appearance at case management conference on
30 April 2015
|
0.25
|
$497.50
|
Total
|
$895.50
|
[15] Mrs Renner and Mr Dustin are jointly and severally liable also
for the
following disbursements:
Description
|
Actual costs (GST inclusive where applicable)
|
Court fees: filing fee on Statement of Claim,
scheduling fee and hearing fee
|
$9,350.00
|
Preparation of bundles (copy centre costs)
|
$1080.65
|
Expert’s costs (Telfer Young)
|
$20,297.50
|
Process Server’s fees
|
$92.50
|
Title searches (x 5)
|
$25.00
|
Total
|
$30,845.15
|
Is Mr Renner entitled to increased costs?
[16] Mr Gudsell submits that in the event that Mr Renner is unable to
recover against Mr Dustin, and as a result the liability
of Mrs Renner is
increased, Mr Renner should be entitled to increased costs against Mrs Renner
pursuant to rr 14.6(3)(b) and 14.11
of the High Court Rules because of the
Settlement Offer.
Principles
[17] Rule 14.6(3)(b)(v) provides:
(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—
...
(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
14.11 Effect on costs
(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.
(2) Subclauses (3) and (4)—
(a) are subject to subclause (1); and
(b) do not limit rule 14.6 or 14.7; and
(c) apply to an offer made under rule 14.10 by a party to a proceeding
(party A) to another party to it (party B).
(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.
(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.
[19] In Holdfast NZ Ltd v Selleys Pty Ltd,10
the Court of Appeal provided guidance on the correct approach to an
award of increased costs. Once the Court has categorised
the proceeding and
worked out a reasonable time for each step in the proceeding (as I have already
done), it is necessary to step
back and consider the costs award to which the
successful party should be entitled.
[20] The principles relating to increased costs where an unsuccessful
party rejects a without prejudice save as to costs settlement
offer can be
summarised:
(a) The offer must be written, be clearly and unambiguously stated11
and provide to the other party sufficient time to consider the
offer.12
10 Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA).
11 See, for example, Concrete Structures (NZ) Ltd v Palmer HC Auckland CIV 2004-463-825,
7 April 2005.
12 Health Waikato Ltd v Van der Sluis [1998] NZCA 88; (1997) 10 PRNZ 514 (CA).
(b) Such an offer does not, by itself, give rise to an
entitlement to increased costs. Whether or not the increase
is awarded is at
the discretion of the Court.13 The offer is not the sole
consideration: all relevant circumstances must be
considered.14
(c) Interest and costs are taken into account when calculating whether
the sum offered is more or less than the judgment sum.15
(d) The failure to accept the offer must be
“without reasonable justification” so putting the
focus on the
conduct of the recipient of the offer and whether that contributed unnecessarily
to the time or expense of the proceeding.16
(e) The reasonableness of a party’s rejection of the offer is to be
assessed
at the time of rejection.17
The Settlement Offer
[21] The Settlement Offer was made approximately two weeks before the hearing
on 12 May 2015. I summarise the Offer:
(a) The Offer identifies the key issue in dispute as the relevance of the purchase of an adjoining property by a company associated with Mr Donne. The Offer explains why the purchase of the property by Mr Donne is entirely irrelevant to the issues that the Court would be required to determine at trial. Counsel for Mr Renner wrote that the purchase has no impact whatsoever on Mr Renner’s entitlement to
seek contribution from his co-guarantors. The arguments advanced
in
14 Gauld v Waimakariri District Council [2014] NZHC 956.
15 Sharp Tudhope v McEwan (2003) Ltd [2010] NZCA 166.
16 Holdfast NZ Ltd v Selleys Pty Ltd, above n 10.
17 See, for example, New Zealand Sports Merchandising v DSL Logistic Ltd HC Auckland
CIV 2009-404-5548, 19 August 2010.
support of this proposition largely align with my findings in my
judgment dated 11 June 2015.18
(b) The Offer expresses the view that following the summary judgment
proceedings, full discovery was provided by Mr Renner and
there was nothing in
the discovery material that disentitles Mr Renner from seeking full
contribution from Mrs Renner and
Mr Dustin based on the settlement sum of
$1,320,000. It avers that Mrs Renner and Mr Dustin do not have a defence
to the
claim.
(c) The Offer then explains that Mrs Renner’s and Mr
Dustin’s liability will be determined by the number of
solvent
co-guarantors. It explains that if Mr Dustin is insolvent, then Mrs
Renner will be required to pay contribution
of $470,000 together with interest
and costs. The Offer sets out a table with a number of scenarios detailing Mrs
Renner’s
potential liability depending on the solvency of Mr
Dustin.
(d) Mr Renner expresses real doubt about the ability of Mr Dustin to
pay the sum claimed in the light of his earlier bankruptcy
and the information
provided about his current financial position.
(e) The Offer states that:
We advise that our client is willing to enter into full and final settlement
with Mrs Renner and Mr Dustin as co-guarantors, if they
pay a total sum of
$475,000 to him, with costs to lie where they fall. How the sum of $475,000
is divided between Mrs Renner
and Mr Dustin is a matter for them to
consider. The full terms of any settlement are to be recorded in a Settlement
Deed satisfactory
to all parties.
We invite Mrs Renner and Mr Dustin to present a joint proposal in
settlement of our client’s claim.
(f) The Offer gave Mrs Renner and Mr Dustin until 5:00 pm on 15 May
2015 to accept the Offer.
18 Renner v Renner, above n 1.
(g) The Offer warns that if the Settlement Offer is rejected, the
letter containing the Offer will be provided to the Court
in support of a claim
for increased costs against Mrs Renner and Mr Dustin.
The parties’ submissions
[22] Mr Gudsell submits that, for two reasons, Mrs Renner’s refusal
to accept the Settlement Offer was unreasonable in all
the circumstances and
justifies a 50 per cent uplift on scale costs. First, the Offer made it clear
that Mrs Renner had no defence
to Mr Renner’s claim. Second, the Offer
made it clear that the quantum of Mrs Renner’s liability to pay
contribution
is to a large degree determined by Mr Dustin’s ability
to make a contribution. Mrs Renner had been provided with enough
information
to reach a conclusion that Mr Dustin was unlikely to be able to pay.
[23] Mr Nabney for Mrs Renner submits that in the settlement letter, Mr Renner required Mrs Renner to pay a sum substantially greater than that which she is liable in the first instance being $186,666.67 plus interest. He adds that at the time it was known to Mrs Renner that Mr Dustin’s bankruptcy was annulled on 14 September
2012, some six months after he had been adjudicated bankrupt and the basis of
annulment was that the Court was satisfied that his
debts had been fully paid or
satisfied and that the assignee’s fees and costs incurred in the
bankruptcy had also been paid.
So, he concludes, it was reasonable that Mrs
Renner proceeded with her defence notwithstanding the Settlement Offer because
it required
her to pay substantially more than the sum for which she was
potentially liable.
[24] Finally, Mr Nabney submits that Mrs Renner’s liability will not be known until such time as Mr Renner seeks to take enforcement action against Mr Dustin in relation to the judgment obtained against him. He says that any inability to recover will not be a result of the way in which Mrs Renner has conducted the proceedings, but, rather, Mr Dustin’s inability to pay, and Mrs Renner should not be penalised for that inability.
Discussion
[25] I am not prepared to grant an uplift of costs against Mrs Renner
that would be conditional upon Mr Renner not being able
to recover against Mr
Dustin. The focus of r 14.6(3)(b)(v) is properly on whether the rejection of
the offer was reasonable (despite
the ultimate result) so as to have contributed
unnecessarily to the time or expense of the proceeding. The rejection of a
settlement
offer is either reasonable or unreasonable at the time the rejection
is made. The reasonableness or unreasonableness of a rejection
does not
depend on the ultimate result of the hearing or the ability to enforce the
judgment against a second defendant who is jointly
and severally liable for the
judgment sum. It follows logically that an uplift for the purposes of r
14.6(3)(b)(v) cannot depend
on an uncertain future event. It would go against
the scheme of the rules to make a conditional order of the nature sought by Mr
Gudsell.
[26] I am also of the view that increased costs are not available in any
event. Mr Renner told Mrs Renner that she would not win,
should be careful
because of Mr Dustin’s likely impecuniosity, and asked her to pay what he
was seeking. It was not unreasonable
for Mrs Renner to reject that offer and
defend the claim. She lost. Scale costs apply.
Orders
[27] In relation to interest, I make the following orders:
(a) Mrs Renner must pay interest of $34,160.00 on the sum
of
$186,666.67.
(b) Mr Dustin must pay interest of $103,700.00 on the sum
of
$566,666.67.
(c) If Mr Renner is entitled to an increased contribution from Mrs Renner due to an inability to recover against Mr Dustin, Mrs Renner’s liability to pay interest will increase accordingly. Mrs Renner cannot be obliged to pay more than $86,010.00 in interest.
[28] In relation to costs and disbursements, I make the following
orders:
(a) Mrs Renner and Mr Dustin are jointly and severally liable to pay
to
Mr Renner $43,100.50 in costs.
(b) Mrs Renner must, in addition to the amount stipulated in [27](a), pay to
Mr Renner a further $3,482.50 in costs.
(c) Mr Dustin must, in addition to the amount stipulated in [27](a), pay
to
Mr Renner a further $895.50 in costs.
(d) Mrs Renner and Mr Dustin are jointly and severally liable to pay
to
Mr Renner $30,845.15 in
disbursements.
Brewer J
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