Wiig v Daken [2016] NZHC 2849 (28 November 2016)

Last Updated: 2 December 2016

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000644 [2016] NZHC 2849

BETWEEN	MURRAY EDWIN NIGEL WIIG Plaintiff
AND	BRIAN MURRAY DAKEN First Defendant
AND	EUROPEAN WOODWORKS LIMITED Second Defendant

Hearing:	28 November 2016 (On the papers)
Appearances:	G A Hair for Plaintiff D M Lester for Defendants
Judgment:	28 November 2016

JUDGMENT OF DUNNINGHAM J RE: COSTS DECISION

[1] The parties seek a determination on costs following my judgment in a claim arising out of the purchase by Mr Daken of Mr Wiig’s business, European Woodworks Limited (EWL).

[2] The original claim was filed by the plaintiff, Mr Wiig, claiming that the defendant, Mr Daken, failed to advance $325,675 to EWL so EWL could repay a loan to Mr Wiig. Mr Wiig also demanded payment of $20,000 from EWL advanced in 2013. The plaintiff’s claim in respect of the sum of $325,675 was conceded by the defendant. I also found that the $20,000 advanced by Mr Wiig was a loan that

_{EWL was liable to repay the loan.}

WIIG v DAKEN [2016] NZHC 2849 [28 November 2016]

[3] In the circumstances, the case largely focused on the counterclaim brought by Mr Daken claiming Mr Wiig had made misrepresentations and had breached warranties contained in the EWL shares purchase agreement. In summary, these allegations were that Mr Wiig:

(a) breached the warranty;

(i) relating to the accuracy of the financial statements disclosed and other information provided about the company and its financial affairs;

(ii) as to whether there were any other amounts owing by the company aside from normal trade credit; and

(b) misrepresented the extent of the company’s overdraft.

[4] I held that while there was a technical breach of the warranty as to the accuracy of the financial statements, there did not appear to be any material loss. I also held that, through a combination of the “entire agreement” clause, and the express removal of a clause in the share purchase agreement specifying the extent of the overdraft at the time of settlement, the claim of misrepresentation must fail.

[5] However, I reserved the issue as to whether there were any other amounts owing by the company aside from normal trade credit. In a judgment issued on

31 August 2016, after hearing further evidence, I held that loss arising out of the breach of warranty amounted to only $4,782.29.¹

Submissions

[6] The plaintiff seeks costs on a 2B basis in the sum of $51,513 with disbursements of $63,992. A breakdown of the plaintiff’s claim is attached in their submission for costs. The plaintiff submits that he was successful overall, both in respect of his claim and defending the defendant’s counterclaim, and costs should

_{follow the event in the usual way.}

¹ Wiig v Daken [2016] NZHC 2044.

[7] The defendant takes a vastly different view. He argues that because the defendants conceded the plaintiff’s claim of $325,675 and that the judgment was largely only concerned with their counterclaim, the plaintiffs should not be entitled to costs. The defendant submits that because he was successful in two of his allegations of the plaintiff’s breach of warranty, albeit only nominal damages resulted, he should be considered the successful party in the proceeding. As a result, costs should be awarded to the defendant on all steps in the proceeding other than commencement, where the plaintiff should be awarded costs on that step.

Law and Analysis

[8] Rule 14.1 of the High Court Rules provides that costs are at the discretion of the Court. The general principles that guide the exercise of the discretion are set out at r 14.2. Relevant to the current circumstance is r 14.2(a), which states that the party who fails should pay costs to the party who succeeds. The essential question is which party is the overall winner of the proceedings.

[9] The authorities provided by the plaintiff ’s counsel, Mr Hair, are pertinent to the issue of costs in the current proceeding. In Waihi Mines Ltd v Auag Resources Ltd, Tipping J observed that:²

[6] A plaintiff who receives or is entitled to nominal damages will not necessarily be regarded as a successful plaintiff. Nevertheless, vindication of a legal right without damages may carry an award of costs. Whether one or other of these approaches is adopted ... is ultimately a matter for the discretion of the judge, upon an assessment of all relevant circumstances.

[10] In Ozsuzoglu v Kay, referred to by Tipping J, Brooke LJ held that:³

In this line of cases, where the plaintiff only recovers between 1% and 3% of the original claim (sometimes, but not always, after a late amendment) the court is entitled to ask itself: Who was essentially the winning party?” It will not be distracted from making a just order as to costs by the absence of a payment into court which the plaintiff obviously would not have accepted... or where the defendants did not have a proper opportunity to made a payment into court which obviously would not have been accepted... Although all these cases are different, in the present case the substantial lis between the parties on the trial of the preliminary issues related to the big claim on which the plaintiff wholly failed.

² Waihi Mines Ltd v AUAG Resources Ltd (1993) 13 PRNZ 372 (CA) at 373.

[11] The plaintiff also refers this court to a decision delivered by Cooper J that is similar to the present proceeding. In Phoenix Organics Ltd v RD2 International Ltd, the plaintiff claimed $221,363 for alleged breaches of contract.⁴ The defendant counterclaimed damages of $44,956.79. In his decision, Cooper J found that the plaintiff’s loss only amounted to $5,993 while the defendant was awarded $41,664 on its counterclaim. Costs were awarded in favour of the defendant. However, Cooper J allowed a $1000 discount for the minimal success of the plaintiff.

[12] In regards to awarding costs for minimal or nominal success, the text, Law of

Costs, notes that:⁵

As costs usually follow the event, and the event equates to ‘success’ in the suit, in determining how to exercise the cost discretion, the courts must first decide whether a party has in fact been successful. It was once said that the award of nominal damages to a plaintiff are ‘a mere peg on which to hang costs’. In other words, for costs purposes, a plaintiff awarded nominal damages is treated as having succeeded. In more recent times, however, courts have doubted whether a plaintiff who recovered only nominal damages should for the purposes of exercising the costs discretion, be regarded as successful. In fact, the modern view seems to be the converse of the historical one, such that ‘the extent will be regarded as going against a party who recovers nominal damages only.

The matter ultimately rests on the facts of each case. The award of nominal damages will not necessarily deny success for costs purposes if some other right is vindicated by the judgment. For instance, if the aim of the suit is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained, a plaintiff who recovers nominal damages may, to that extent, properly be regarded as the successful plaintiff. But in other circumstances, especially if the aim of the suit is to secure a substantial award of damages, an award for nominal damages may be seen as a failure by the plaintiff to establish the claim.

[13] In light of relevant authority and the ultimate outcome of the case, it is clear that the plaintiff has been almost entirely successful and so the normal rule that costs should follow the event should apply. In my view, there are no special reasons to

_{depart from an award of costs on a 2B basis.}

⁴ Phoenix Organics Ltd v RD2 International Ltd (2003) 9 NZCLC 263, 380.

[14] Accordingly, costs are awarded as set out in the schedule to the plaintiff’s

memorandum totalling $51,513.00.

[15] However, the plaintiff also seeks disbursements in the sum of $63,922.05. This sum comprises approximately $11,000 for the usual disbursements, such as filing fees and hearing fees. The plaintiff also claims the sum of $52,862.05 for the expert evidence of Mr Lowe, an accountant from KPMG.

Disbursements

[16] High Court r 14.12 states that disbursements are recoverable if they are “reasonably necessary to the conduct of the proceeding” and “reasonable in amount”.⁶

[17] One of the notable features of this case was that the accounting evidence was of marginal assistance. Neither expert sought to grapple with the case presented by the other and, accordingly, the evidence of both parties was of little utility in resolving the issues in dispute.

[18] Much of the plaintiff’s expert accounting evidence was, in substance, evidence to the effect that there was no claim so there was no loss. While I held that was, in part, correct, that was a legal argument which did not require expert accounting evidence to support it.

[19] While I am conscious that the Court should not embark on a refined assessment of the utility of each expert witness called by the successful party, as those are judgments which can all too easily be made in hindsight and not in advance, this case was particularly striking in the degree to which the expert accounting evidence on both sides failed to assist in the case. For this reason, I am

_{only prepared to award a nominal sum of $10,000 in respect of this disbursement.}

⁶ High Court Rules, rr 14.12(2)(c) and (d).

[20] Accordingly, I order payment of the plaintiff’s disbursements by the defendant as set out in the schedule to the plaintiff’s memorandum, with the exception of the claim for the expert witness, where the disbursement is reduced to

$10,000, making a total award in respect of disbursements of $23,922.05.

Solicitors:

Malley & Co., Christchurch

Cameron & Co., Christchurch