Limitless Construction Limited v McNeil [2018] NZHC 1202 (25 May 2018)

Last Updated: 31 May 2018

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY I TE KŌTI MATUA O AOTEAROA TE ROTORUA-NUI-Ā-KAHU ROHE

CIV-2016-463-120 [2018] NZHC 1202

BETWEEN	LIMITLESS CONSTRUCTION LIMITED (In Liquidation) First Plaintiff DAVID THOMAS Second Plaintiff
AND	PHILLIP McNEIL First Defendant PHILLIP McNEIL, LESLEY McNEIL AND CLIFFORD ERNEST TEASDALE Second Defendants LESLEY McNEIL Third Defendant

Hearing:	On the papers
Counsel:	D Fraundorfer and M Battersby for the Plaintiffs No submission for the Defendants
Judgment:	25 May 2018

JUDGMENT OF PALMER J

This judgment is delivered by me on 25 May 2018 at 4.00 pm pursuant to r 11.5 of the High Court Rules.

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

Registrar / Deputy Registrar

Solicitors:

Holland Beckett Law, Tauranga QS Law, Levin

LIMITLESS CONSTRUCTION LTD (In Liq) v McNEIL [2018] NZHC 1202 [25 May 2018]

What happened?

[1] On 11 August 2017, a five-day hearing of this proceeding was set down for 7 May 2018 in Rotorua. Timetabling directions were made by consent on 5 March 2018.

[2] On 3 April 2018, in the absence of an amended statement of claim, the plaintiffs applied for judgment by formal proof or unless orders. They say they had not heard from the defendants since October 2017. On 5 April 2018, Mr Haines advised he had just been instructed and wished to “comply with the spirit of the timetable”. He sought an extension to the deadline for the statement of defence until 9 April 2018 and advised he would confer with counsel over timetable amendments. The same day, counsel for the plaintiffs sought amended timetabling directions. On 9 April 2018, the Registry asked Mr Haines for his position on the proposed directions. It asked again on 13 April 2018, but received no response.

[3] On 13 April 2018, counsel for the plaintiffs expressed concern about the risk to trial and sought unless orders. On 15 April 2018, the defendants filed a statement of defence. On 17 April, the plaintiffs’ briefs were filed. On 20 April 2018, I directed counsel to file a joint memorandum by 26 April 2018, proposing a new timetable to trial. On 23 April 2018, the plaintiffs requested the defendants’ briefs and documents for inclusions in the common bundle which was due on 27 April 2018.

[4] On 24 April 2018, the plaintiffs filed a memorandum seeking an urgent teleconference. On 26 April 2018, counsel for the plaintiffs advised Mr Haines had indicated the defendants’ briefs would not be served before 4 May 2018. On 27 April 2018, at the teleconference, Mr Haines confirmed that indication. He advised he had been instructed too late for the timetable to be complied with. Counsel for the plaintiffs agreed it would be difficult to hold the trial on that basis and sought an order for wasted costs.

[5] By minute of 27 April 2018, I vacated the fixture set to commence on 7 May 2018 and set a timetable for the plaintiffs and defendants to file submissions on wasted costs. The plaintiffs complied with that timetable. The defendants did not.

Law on wasted, increased and indemnity costs

[6] Awards of costs are at the discretion of the court, under r 14.1 of the High Court Rules 2016. The Court can order that wasted costs be paid. As Heath J stated in Burgess v Monk:¹

There is no doubt that this Court has jurisdiction to order that wasted costs be paid when, through the fault of one or more parties, a trial has been postponed, to the detriment of others. The concept of “wasted costs” includes those incurred for work undertaken that will not have any further benefit to the case of the claimant party, as well as the value of work that will be duplicated in order to prepare for a trial in the future.

[7] In Jeffreys v Morgenstern, Venning J stated:²

... This Court has jurisdiction to make an order for wasted costs. As this Court has previously observed in the case of Fu Hao Construction Ltd v Landco Albany Ltd default that leads to vacation of fixtures leads to inconvenience and costs not only to the other parties to that proceedings but to other parties awaiting fixtures in the Court. Fixtures allocated by this Court are commitments of limited judicial and Court resources. Time is booked for the case. Other parties who might otherwise have had their cases allocated hearing time are disadvantaged by default which leads to late vacation of fixtures.

That is a further reason which supports an award of wasted costs. The Court should apply sanctions to parties who, through their own default, cause fixtures to be vacated.

[8] In relation to increased and indemnity costs, relevantly, r 14.6 provides:

14.6 Increased costs and indemnity costs

(1) Despite rules 14.2 to 14.5, the court may make an order—

(a) increasing costs otherwise payable under those rules (increased costs);

(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2) The court may make the order at any stage of a proceeding and in relation to any step in it.

(3) The court may order a party to pay increased costs if—

¹ Burgess v Monk [2015] NZHC 1881 at [15].

2. Jeffreys v Morgenstern [2013] NZHC 1361 at [31]–[32], citing Fu Hao Construction Ltd v Landco Albany Ltd HC Auckland CIV-2004-404-6608, 23 May 2008.

...

(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i) failing to comply with these rules or with a direction of the court; or

...

(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

...

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

(4) The court may order a party to pay indemnity costs if—

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

...

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[9] Increased costs should not usually exceed 50 per cent of scale costs.³ Consideration should be given to the extent to which the failure to act reasonably contributed to the time or expense of the proceeding.⁴

Submissions

[10] Mr Fraundorfer submits the defendant’s conduct caused the plaintiffs to waste significant costs. He submits the defendants’ actions have been unreasonable so as to justify an order for increased costs. He points to the defendants failing to engage with

³ Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA) at [46]–[48].

4. Commissioner of Inland Revenue v Chesterfields [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

the plaintiffs since October 2017 until approximately one month before trial and failing to file an amended statement of defence as required.

[11] The plaintiffs claim their actual wasted costs, amounting to $33,442.50 (excluding GST and disbursements) or, alternatively wasted costs on a 2B basis plus disbursements with an uplift of 20 per cent amounting to $27,609.60. They also claim wasted expert fees of $4,355 (excluding GST). They reserve their right in relation to any impact of the adjournment on the plaintiffs’ interest claim.

[12] The defendants make no submissions.

Decision

[13] I agree the defendant’s lack of communication and unexplained default in meeting the timetable, resulting in an adjournment five working days before trial, caused the plaintiffs to waste significant costs. Those defaults have been not only before April 2018 but also since Mr Haines was instructed. I make an order for wasted costs.

[14] I further agree an award of increased costs is justified in these circumstances in the amount of a 20 per cent uplift on scale costs. The defendants have failed to comply with the directions of the Court with no apparent reasonable justification. I stop short of ordering indemnity costs.

[15] I award the plaintiffs wasted costs on a 2B basis with an uplift of 20 per cent, amounting to $25,689.60, plus disbursements of $1,600 and wasted expert fees of
$4,355 (excluding GST).




Palmer J