Spooner Commercial Limited v A1 Commercial Services Limited (k/a Cambridge Carpet Cleaning Limited) [2015] NZHC 549 (24 March 2015)

Last Updated: 18 August 2017

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-000234 [2015] NZHC 549

UNDER	Part 20 of the High Court Rules
IN THE MATTER	of an appeal from the District Court
BETWEEN	SPOONER COMMERCIAL LIMITED First Appellant KAREN LINDA SPOONER Second Appellant
AND	A1 COMMERCIAL SERVICES LIMITED (NOW KNOWN AS CAMBRIDGE CARPET CLEANING LIMITED) Respondent

Hearing:	On the papers
Appearances:	M Branch and K Lomas for Appellants E J Hudson for Respondent
Judgment:	24 March 2014

JUDGMENT OF WOOLFORD J [As to costs]

This judgment was delivered by me on Tuesday, 24 March 2015 at 4.00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors: Harkness Henry, Lawyers, Hamilton

_{Counsel: Elliot Hudson, Barrister, Hamilton}

SPOONER COMMERCIAL LIMITED v A1 COMMERCIAL SERVICES LIMITED (NOW KNOWN AS CAMBRIDGE CARPET CLEANING LIMITED) [2015] NZHC 549 [24 March 2014]

Introduction

[1] The appellants, Spooner Commercial Limited and Karen Spooner, seek costs following their appeal against a District Court quantum judgment.¹ The respondent, A1 Commercial Services Limited, submits that costs for the appeal should lie where they fall. There is an additional dispute over the costs to be awarded for the District Court quantum hearing.

Background

[2] The background is set out in full in my judgment dated 21 November 2014. In brief, the second appellant, Ms Spooner, the proprietor of the first appellant, sold a Hamilton-based carpet cleaning business known as A1 Cleaning Services (A1) to a Mr and Mrs Holden for $282,500. The Holdens purchased A1 through the respondent company. The parties entered their agreement on 4 March 2010 and settled on 15 March 2010. The main assets of the business were its multiple fixed- term and open-term cleaning contracts with a number of large businesses in Hamilton. Under the agreement the intangible assets of A1 – namely, the cleaning contracts and the rest of A1’s inherent goodwill – was valued at $261,300.

[3] Shortly after the settlement date A1 lost two major client contracts with Bettle Advertising and WEL Networks. Those contracts, worth a total of $7,267.75 per month, constituted 23 per cent of the represented monthly turnover of $31,008. At trial, the respondent successfully proved that the appellants failed to provide all relevant information (such as the fact Bettle Advertising had complained about the service provided by A1 and that WEL Networks had indicated it intended to put its

contract up for review) in breach of its obligations under the contract.²

[4] On appeal Wylie J made an additional finding that Mrs Spooner’s conduct,

examined objectively, was misleading and deceptive. He remitted the matter of the appropriate quantum of damages back for determination at the District Court.³

¹ _{Spooner Commercial Limited v A1 Commercial Services Limited [2014] NZHC 2911.}

² A1 Commercial Services Limited v Spooner Commercial Limited DC Hamilton CIV-2011-019-

_{1039, 10 August 2012.}

³ A1 Commercial Services Limited v Spooner Commercial Limited [2012] NZHC 796.

[5] At the District Court Judge Spiller adopted the revenue-based approach advocated by the respondent’s expert witness, Mr Dobson, who replaced the respondent’s preceding witness, Mr Fieldes. He set damages at $50,114.00, being the loss in the value of A1’s goodwill.⁴ In doing so he rejected the evidence provided by the appellants’ expert witness, Mr Braithwaite.

[6] On appeal I considered that sum overstated the loss suffered by the respondent.⁵ It did not, for example, factor in the likelihood that the contracts would have been terminated anyway, nor the likelihood that they would have continued. Overall I preferred Mr Braithwaite’s evidence, subject to a number of adjustments and consideration of not only what was the right method, but the right result. Mr Dobson’s evidence, in contrast, calculated damages at the wrong time and did not adequately respond to the criticisms put to Mr Fieldes’ evidence by Wylie J on appeal. I concluded that the market value of the business was no more than

$250,000 at the time of contract. That calculation valued A1’s loss at $32,500. This award fell in between the appellants’ and respondent’s submissions as to the correct assessment of loss, being $16,770.53 and $50,114.00 respectively.

Costs on the appeal

[7] The appellants’ position is that they were the successful parties on appeal and costs should follow the event. They seek costs on a 2B basis plus disbursements, a total of $12,921.⁶

[8] The respondent submits the appellants were only partially successful, and therefore costs should lie where they fall. In further submissions the appellants accept that they were only partially successful, but that does not necessarily mean r 14.2(a) of the High Court Rules has no application. That is because the respondent’s main submission was that this Court should not disturb the District Court’s finding that Mr Dobson’s assessment of loss was preferable. The appellants

_{claim this means the respondent had no success at all.}

⁴ A1 Commercial Services Limited v Spooner Commercial Limited DC Hamilton CIV-2011-019-

_{1039, 12 May 2014.}

⁵ _{Spooner Commercial Limited v A1 Commercial Services Limited, above n 1.}

⁶ It is notable that the appellants’ costs on appeal equate to a significant portion of the reduction in

liability they ultimately received ($17,614).

[9] In my assessment it is clear the appellants were only partially successful on appeal. The appellants were successful in the sense that it was accepted by this Court that Mr Braithwaite’s approach gave a better approximation of the loss suffered by the respondent, somewhat because Mr Dobson’s assessment did not adequately respond to the difficulties identified by Wylie J in Mr Fieldes’ evidence. However, this Court also accepted that what was important was not the right method, but what is the right result. Here I rejected the appellants’ submission that

$16,770.53 was sufficient to make right the loss of business suffered by the respondent. Rather, in my assessment that claim clearly undervalued the respondent’s loss by a considerable margin, being just over half the substantive result I reached in fixing damages at $32,500.

[10] From that general position it is incorrect to surmise the respondent had no success at all in the proceeding, as is submitted by the appellants. That is to put the matter too forcefully. The respondent received an award of $32,500 in damages, which is in fairness a third less than that received in the District Court, but almost double the quantum sought by the appellants on appeal. In those circumstances I do not consider the respondent had no success, and since each party had some degree of success there is good reason to depart from the general principle that costs should follow the event. In order to do justice to both sides, and bearing in mind that in a quantum case it is the substantive result reached that matters most, I consider costs should lie where they fall.

District Court costs

[11] In my substantive judgment I acquiesced to the appellants’ request that the District Court costs should be determined by this Court in light of its determination of the matter.

[12] The appellants accept the respondent is entitled to costs in relation to obtaining the finding of liability. That entitlement totals $9,190 plus disbursements of $1,204.10.

[13] However, the appellants submit that costs in relation to the quantum hearing should be neutral, that they should be entitled to recover Mr Braithwaite’s costs in

relation to that hearing, and the respondent should not be entitled to recover any

contribution to Mr Dobson’s costs.

[14] The respondent argues that given this Court’s findings it would have been entitled to costs in the District Court for the quantum hearing. That this Court rejected Mr Dobson’s methodology and only partially accepted Mr Braithwaite’s is not determinative of the issue of whether or not the respondent was successful. Rather the respondent was successful, having been awarded damages in the sum of

$32,500.

[15] I agree with the appellants that the evidence adduced by the respondent did not adequately respond to the criticisms made by Wylie J on appeal. Mr Dobson’s approach proceeded to seek damages in the quantum hearing using the exact same methodology as that originally provided by Mr Fieldes. In light of that abject failure the respondent rightly accepts that it would be inappropriate for it to be awarded Mr Dobson’s fees for that hearing. There is to be no contribution by the appellants to Mr Dobson’s costs.

[16] Having regard to the District Court judgment in light of my judgment, the respondent can be considered the successful party. However, it is fair to say that it would have been only partially successful, having argued that it was entitled to

$50,114, but ultimately in receipt of only $32,500 in costs, based on the evidence of the appellants’ expert witness, Mr Braithwaite, and not Mr Dobson. The quantum hearing was also partially necessitated due to the problems in the evidence put forward by the respondent through Mr Fieldes, meaning Wylie J had no footing on which to adequately grant costs. Mr Dobson perpetuated this problem by not addressing on appeal the criticisms put to Mr Fieldes’ evidence by Wylie J.

[17] Taking those factors into consideration I consider costs for the quantum hearing should lie where they fall.

[18] The appellants request a contribution from the respondent for Mr Braithwaite’s costs at the quantum hearing. Although I would normally consider Mr Braithwaite’s and Mr Dobson’s costs should also lie where they fall, following

the result reached, in this case I consider Mr Dobson’s failure to adequately respond to the criticism put to Mr Fieldes’ approach as important. On appeal, I rejected Mr Dobson’s approach as based on the incorrect premise that costs should be determined at the time of judgment, rather than at the time of contract. Although I considered the inputs mooted by Mr Braithwaite in his methodology were not entirely correct, his approach was the only method left available to this Court for calculating quantum, and in light of Wylie J’s judgment it was the right method to employ. It was evidence both necessary and specific to the conduct of the quantum hearing and ultimately accepted by this Court.

[19] In those circumstances I consider that the appellants are entitled to recover a half portion of Mr Braithwaite’s costs that were incurred in respect to the quantum hearing. His costs for that hearing amount to $4180.25. Given the depth of Mr Braithwaite’s evidence I accept a third portion of his costs incurred at the first hearing fairly represents time that would have been spent familiarising himself with the file if he did not have the necessary background. The total costs are $5,478.37. I consider the appellants are entitled to recover half that sum, namely $2,739.185, from the respondent.

Result

[20] Costs on the appeal (CIV-2014-419-234) are to lie where they fall.

[21] Costs on the liability hearing (CIV-2011-019-1039) are to be awarded to the respondent on the basis set out at [12] above.

[22] Costs on the quantum hearing (CIV-2011-019-1039) are to lie where they fall. The respondent is to contribute $2,739.185 to the appellants for Mr Braithwaite’s costs.

.....................................

Woolford J