Juhasz v Medical Life Assurance Society Limited [2018] NZHC 147 (14 February 2018)

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[1] I gave a judgment dated 23 November 2017 declining a claim for damages by Dr Juhasz and Eva Juhasz Limited (the plaintiffs) and awarding Medical Life Assurance Society Ltd (MAS) its counterclaimed amount of $46,539.53.¹

[2] The defendant has submitted that the proceedings should be categorised as standard 2B proceedings and the plaintiff has taken no issue with this. This

JUHASZ v MEDICAL LIFE ASSURANCE SOCIETY LIMITED [2018] NZHC 147 [14 February 2018]

[3] MAS seeks costs and disbursements of $129,064.68 in relation to the proceedings and also seeks the recall, amendment and reissue of the 23 November

[4] The plaintiffs’ submissions do not address the application for recall and re- issue of the judgment with the inclusion of interest, so I will treat that as unopposed and will address it in a separate minute.

[5] The parties have been unable to reach agreement on three discrete aspects of the costs claims:

Answers to interrogatories and preparation by MAS of list of authorities and common bundle

[7] The plaintiffs do not accept item 17 on the costs schedule, arguing that the answers to interrogatories were not referred to in either opening or closing submissions, nor was the Court taken to the answers to interrogatories at any stage.

[8] MAS states that the answers to interrogatories were referred to in paras 10 and

[9] The plaintiffs do not accept item 32 on the costs schedule, arguing that MAS’s contribution to the common bundle was insignificant and many of its prepared bundles of authorities were not referred to in opening or closing submissions. An adjustment is therefore requested taking this into account.

[10] MAS states that its contribution to the preparation of the common bundle was not insignificant, amounting to 14 pages of additional documents. Only three references were not referred to during opening and closing submissions.

[12] The plaintiffs do not accept item 35 on the cost schedule, arguing that second counsel did not participate during the 2.25 days they were in Court and that the duration of the hearing was relatively short. However, the hearing did cover five days. The issue of whether the case was an appropriate one for second counsel is not determined by whether second counsel actually addressed the court. I note that the plaintiff was represented by two counsel throughout the hearing and junior counsel for the plaintiff did not address the court either.

[13] MAS accepts that second counsel did not appear after the morning session on

16 October 2017, nor on 18 October. It submits that a reduction of 0.875 of a day would be reasonable, reducing the item 35 claim to $2787.50. This is an appropriate concession.

[14] Awarding of costs for second counsel is at the Court’s discretion. This was a case of sufficient complexity to warrant second counsel. MAS accepts that no allowance for second counsel should be granted for time she was not present in Court and therefore this element of the costs is reduced accordingly.

[15] The plaintiffs disagree with the full award of Dr Kenny’s expert fee, arguing that the GST component of this fee should be deducted as MAS will have claimed an input credit.

[16] The invoices provided show that the disbursement was GST-inclusive. However, a GST-registered party will generally recover a GST input credit for the GST paid to its solicitor, and therefore costs on disbursements should be GST-exclusive.²

[18] An amount of $690.68 has been claimed for Dr Kenny’s travel. However, no details of what the $690.98 specifically relates to have been included. Some travelling costs such as travelling time and airport parking have been included in the invoice from Dr Kenny. In the absence of details about the $690.68, this part of the costs application is declined.

[19] The plaintiffs challenge the amount claimed in respect of the Deloitte fee, arguing that the claimed sum of $52,345.13 was unreasonable.

[20] Under r 14.12(2) of the High Court Rules 2016, a disbursement must be specific to the conduct of the proceeding, reasonably necessary for the conduct of the proceeding, and reasonable in amount.

... bears the onus of satisfying [the Court], on the balance of probabilities, that the expert disbursements it seeks to recover were reasonably necessary for the conduct of the proceeding and reasonable in amount.

[22] Katz J followed a broad approach in assessing the reasonableness of Mobil’s expert costs:⁴

(a) Determine whether a particular attendance (or category of attendances) was reasonably necessary for the conduct of the

²New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282 at [6].

proceeding. This requires a sufficient description of the particular work undertaken. A supporting affidavit from an independent expert practising in the same field may be necessary or appropriate when the quantum claimed is significant.

(b) Consider the amount of time claimed for the relevant attendance (or category of attendances) and whether it is reasonable, allowing for the significance and complexity of the particular work. A table showing the various steps taken and the costs associated with each step may assist.

(c) Consider the hourly rate charged for each author and whether that is reasonable, relative to the experience of that author and the complexity of the work undertaken.

(d) Consider any additional evidence which is relied upon to show that the rate charged is a reasonable one (or that the overall costs are reasonable). Again, in some cases (such as where the quantum claimed is particularly large) it may be necessary to file a supporting affidavit from an independent person practising in the same field as the relevant expert(s), deposing that the hourly rates claimed are appropriate and in accordance with industry standards.

[23] In Kelly v Lasque Construction Ltd, Woolford J had to consider the reasonableness of an expert’s fees and the recoverability of the fees charged by his firm.⁵In that case, the first invoice showed one lump sum charged, with no hourly breakdown, and then a charge for 22.5 hours’ work by one expert and 26.5 hours’ work by another, indicating that the work carried out was reviewing meetings, and doing a comparative review and progress on the compilation of the brief of evidence. A second invoice indicated that several experts had contributed in providing services but no specific description was provided of the work involved.⁶

[24] Woolford J stated that while comparative evidence showing the general rates of quantity surveyors would have been helpful in establishing reasonableness, the rates charged did not appear to be high, with the charge per hour for the most senior expert being around $220 per hour.⁷Additionally, the quantum claimed for costs was only five per cent of the overall quantum sought in the litigation.⁸

_{[25] In this case, the first invoice from Deloitte of $19,949.63
states that it is for:}

Time costs incurred in the period 20 July to 31 August 2017 in analysing information and preparing our report for Phase 1 of the Juhasz matter.

There is no breakdown of the hours required to complete this analysis and preparation, nor is there any information who undertook the work.

Time costs incurred in the period 1 to 30 September in finalising our report and brief of evidence for the Juhasz matter.

[27] The third invoice of $29,963.25 does provide more detail, not only stating the nature of the work undertaken, but also detailing the hours of each expert involved. The total hours for each expert were:

[28] For the plaintiffs, Ms Meechan QC argues that while Mr Jordan would have spent time preparing to give evidence and three hours in Court giving his evidence, it is difficult to determine what work the other Deloitte members completed.

[29] It is therefore not possible to ascertain exactly how the fees were calculated or what they were for precisely. MAS has therefore failed to prove that Deloitte’s fees in the sum claimed were reasonable.

[30] Where the party seeking expert witness fees has failed to satisfy the Court, on the balance of probabilities, that the fees it seeks to recover are reasonable, a reduction in costs in the award of those fees is appropriate. In Auckland Waterfront, where Katz J was unable to determine from the invoices provided how the fees were calculated or what precisely they were for, a reduction of 30 per cent of the total expert costs

claimed was deemed appropriate.⁹A more modest reduction of 10 per cent was found to be reasonable in Kelly v Lasque Construction Ltd, given that the quantum claimed for costs was just five per cent of the overall quantum sought in the litigation.¹⁰

[31] On the facts of the present case, a reduction of 30 per cent, in line with that of Auckland Waterfront, would be justified. That reduces the claim in respect of Deloitte’s fees by $15,703.54 to $36,641.59.

[32] Under the r 14.10(1) of the High Court Rules 2016, a party to a proceeding may make a written offer to another party at any time that:

[33] Rule 14.6(3)(b)(v) provides that increased costs may be awarded where a party fails to accept an offer of settlement without reasonable justification, with the result that they contribute unnecessarily to the time or expense of the proceeding or any step in it.

[34] In Weaver v HML Nominees Ltd, Katz J identified a number of factors which would impact on whether increased costs should be awarded.¹¹These included the amount of preparation for trial already undertaken, whether the parties were in a position to assess the merits when the offer was received, and the timing of the offer.

[35] Having found in that case that the offer was a reasonable one, Katz J determined that given the proceedings had been underway for some time and extensive preparation had been undertaken, the plaintiffs would have been in a position to

_{undertake a realistic assessment of the offer.}¹²_{Furthermore, the offer was made three}

⁹Auckland Waterfront Development Agency Ltd v Mobil Oil New Zealand Ltd, above n 3, at [54].

months before trial and the plaintiffs behaved unreasonably in refusing to engage with the offer. An uplift of 50 per cent was granted.¹³

[36] In Kelly v Lasque Construction Ltd, where a sum of $100,000 was offered by the defendants, and it was found that the plaintiffs had little prospect of succeeding, an uplift of 20 per cent was awarded. In that case, the offers had been made a considerable time before the hearing commenced.¹⁴

[37] The rule permits an offer “at any time”, but the later the offer is made, the less impact it will have on costs awarded. In Strachan v Denbigh Property Ltd, an offer made by 30 November for a hearing on 2 December was disregarded for costs purposes.¹⁵However, in Health Waikato Ltd v Van der Sluis, an offer made 12 days before a hearing was held to be sufficient.¹⁶

[38] In this case, an initial offer was made by MAS on 10 November 2016, in which MAS indicated it had a counterclaim but would be willing to settle on the basis that the plaintiffs discontinue the proceeding with there being no question as to costs.

[39] A similar offer was repeated on 9 October 2017, a week before the hearing was to commence, in which MAS offered to settle on the basis that each party discontinued their claims and bore their own costs.

[40] A third offer was made on 12 October 2017, four days before the hearing, in which MAS offered to settle on the basis that:

(a) MAS would honour the plaintiffs’ claim to date if they did not seek interest or general damages, and with each party bearing their own costs;

(b) MAS would continue to assess the insured’s partial disability in accordance with the policy going forward; and

¹⁵Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [21].

¹⁶Health Waikato Ltd v Van der Sluis [1997] NZCA 223; (1997) 10 PRNZ 514, [1997] ERNZ 236 (CA) at 245.

(c) for the purpose of MAS being able to accurately and properly assess the claim going forward, the plaintiffs must provide full and accurate disclosure of all relevant information when requested by MAS.

50 per cent of scale costs for the preparation for hearing and appearance at hearing for principal counsel together with second counsel.

[42] The plaintiffs submit that these two Calderbank offers were made very close to the hearing, by which point a significant amount of time and money had already been invested. If the Court is minded to grant uplift, it should be significantly less than the 50 per cent claimed.

[43] The two offers made by MAS were reasonable and, although by October 2017 a significant amount of time and money had been invested by the plaintiffs in the proceedings, this should have meant they had a clear picture of whether their claim would succeed or not. The claim failed on all counts. However, the offers (particularly that of 12 October 2017) were very close to trial and, unlike in Weaver v HML Nominees Ltd, there is nothing to suggest that the plaintiffs refused to engage with the offer. Therefore an uplift in the vicinity of 30 per cent is appropriate.

[44] MAS was awarded the sum counterclaimed by it in full. An award of interest on overpaid benefits from the date on which the benefits were paid was sought at the prevailing rate in the Judicature Act 1908.

[45] My judgment did not address whether interest in respect of the counterclaim award was to be awarded or not.

[46] An omission to award interest may be corrected by the Court by a recall, amendment and reissue of the judgment pursuant to r 11.9 of the High Court Rules

A judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.

[47] The omission to award interest to MAS in respect of the counterclaim was an oversight on my part. In a separate minute, I have therefore recalled my judgment and amended it to provide for interest to be awarded accordingly.

[48] On 1 December 2017, MAS wrote a letter to the plaintiffs setting out its costs and other disbursements as:

Scale costs on a 2B basis	$60,098.50 (as claimed by MAS) Second counsel (item 35) – MAS accepts that this should be reduced from $5017.50 to $2787.50. This brings scale costs down from $60,098.5 to $57,868.50. Scale costs = $57,868.50
Uplift for items 33-35 inclusive due to Calderbank offers made on 10 November 2016, 9 October 2017 and 12 October 2017	Uplift of 30% granted = $5,853.75
Expert witness fees of: Dr Kenny (fees) Dr Kenny (travel) Deloitte (Barry Jordan)	$56,750.01 (as claimed by MAS) $3,715.10 – GST-exclusive = $3,230.52 $690.68 – Dr Kenny’s travel expenses were not detailed, therefore $0 $52,345.13 – reduced by 30 per cent, this is $36,641.59 Total expert witness fees awarded = $39,872.11
Disbursements	$1,644.00
Total	$105,238.36

(b) in respect of the counterclaim, the sum of $46,539.53 plus interest of five percent per annum:

BETWEEN	EVA SUSAN JUHASZ First Plaintiff EVA JUHASZ LIMITED Second Plaintiff
AND	MEDICAL LIFE ASSURANCE SOCIETY LIMITED _Defendant

Hearing:	On the papers
Counsel:	C Meechan QC and W D Buckham for Plaintiffs E Horner and L Tidey for Defendant
_Judgment:	_{14 February 2018}

High Court of New Zealand Decisions

Juhasz v Medical Life Assurance Society Limited [2018] NZHC 147 (14 February 2018)