Minister of Education v James Hardie New Zealand [2018] NZHC 2960 (15 November 2018)

Last Updated: 26 November 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2013-404-1899 [2018] NZHC 2960

UNDER	Consumers Guarantee Act 1993, the Fair Trading Act 1986 and the Building Act 2004
BETWEEN	THE MINISTER OF EDUCATION AND OTHERS First to Fourth Plaintiffs
AND	JAMES HARDIE NEW ZEALAND First Defendant STUDORP LIMITED Second Defendant CARTER HOLT HARVEY Third Defendant ........../continue

Hearing:	On the papers
Counsel:	JA Farmer QC, NF Flanagan and J Carlyon for Ministry JG Miles QC, M Heard and ED Nilsson for Carter Holt Harvey Limited TC Weston QC, JRJ Knight and DJ Barr for Councils
Judgment:	15 November 2018

JUDGMENT OF FITZGERALD J

[As to costs in relation to judgment on separate question/pleadings issues]

This judgment was delivered by me on 15 November 2018 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date...............

Solicitors: Meredith Connell, Auckland

LeeSalmonLong, Auckland Simpson Grierson, Auckland

The Minister of Education v James Hardie New Zealand [2018] NZHC 2960 [15 November 2018]

Defendants continued

CSR BUILDING PRODUCTS (NZ) LIMITED
Fourth Defendant

AND AUCKLAND COUNCIL AND OTHER TERRITORIAL AUTHORITIES LISTED IN SCHEDULE 1 TO THE FIRST
AMENDED STATEMENT OF CLAIM BY THIRD DEFENDANT AGAINST FIRST TO FIFTIETH THIRD PARTIES
First to Fiftieth Third Parties

Introduction

[1] By judgment dated 21 June 2018, I determined a number of interlocutory applications, being:

(a) the Ministry’s application for determination of a separate question;

(b) Carter Holt’s application for trial directions (including in relation to trial staging and for leave to file a counterclaim); and

(c) the Ministry’s strike out application in relation to two aspects of Carter Holt’s pleadings.

[2] I granted the Ministry’s application for determination of a separate question. As a consequence, the Ministry successfully opposed Carter Holt’s application for trial staging. I granted the Ministry’s application to strike out certain aspects of Carter Holt’s pleadings. Finally, I granted leave to Carter Holt to file a counterclaim.

[3] In my judgment, I encouraged the parties to seek to agree costs. Carter Holt and the Councils have agreed that Carter Holt is to pay the Councils costs of $14,465.

[4] Carter Holt and the Ministry have not, however, been able to agree costs. There is also a costs issue in relation to Carter Holt’s application to recall my judgment which in the event, it did not pursue.

[5] By way of summary of the Ministry and Carter Holt’s respective positions on costs:

(a) Carter Holt accepts the Ministry is entitled to costs on the Ministry’s application for determination of a separate question, and the Ministry’s opposition to Carter Holt’s trial staging application. The parties do not agree, however, the appropriate banding (for scale costs purposes) of those applications.

(b) Carter Holt also accepts the Ministry ought to be awarded costs in relation to the strike-out application. The Ministry seeks indemnity
costs. Carter Holt does not accept indemnity costs are appropriate, and says costs should be ordered on a scale basis.

(c) On the recall application, the Ministry again seeks indemnity costs, which Carter Holt says is inappropriate. It accepts the Ministry ought to be awarded costs on the recall application, but again on a scale basis.

(d) Carter Holt also proposes an “in the round” discount to the scale costs to be awarded to the Ministry, to reflect the measure of success Carter Holt says it had on its application, including being granted leave to file a counterclaim.

Approach

[6] The key principles in relation to costs are not in dispute:

(a) The ordinary approach to the determination of costs is that the successful party overall should be awarded costs on a scale basis.¹

(b) Where the successful party has not been successful to the full extent of its claims, it may be appropriate to apply a discount to the costs award to reflect that fact. Discounts of that sort are to be considered “in the round”.²

(c) When applying the scale costs regime, the Court must consider each formal step individually for the purposes of assessing the appropriate “time band”. A blanket assessment is not appropriate.³

(d) Apart from the specific situations set out in r 14.6(4)(c)–(e), indemnity costs are awarded only where the unsuccessful party “has behaved either very badly, or very unreasonably” including by engaging in

¹ Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109; [2013] 1 NZLR 305 at [8].

2. Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [18]; Weaver v Auckland Council [2017] NZCA 330 at [18].

³ Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544, (2007) 18 PRNZ 743 at [35].

“flagrant misconduct”.⁴ The threshold is high. And even where the threshold is met, a claimant will only be entitled to costs incurred that are reasonable in the circumstances.

[7] I make one further observation. It is, in my view, becoming increasingly common for successful parties in commercial litigation (not confined to this proceeding) to seek increased and/or indemnity costs. That is often on the basis the party has been successful, but without detailed or significant analysis of why the other party’s conduct appropriately falls within those relatively limited circumstances in which increased and indemnity costs are appropriate. In relation to indemnity costs in particular, the threshold is indeed high. As I stated in AFI Management Pty Ltd v Lepionka and Company Investments Ltd:⁵

• [15] Indemnity costs may be awarded if “the party [against whom costs are sought] has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in the proceeding”.⁶ Indemnity costs may also be awarded if some other reason exists justifying the imposition of indemnity costs.⁷

[16] In Bradbury v Westpac Banking Corp, the Court of Appeal explained that indemnity costs may be awarded where a party has behaved either badly or very unreasonably.⁸ It contrasted the jurisdiction to grant increased costs, being directed to simple unreasonableness, with the jurisdiction to grant indemnity costs, being directed to “distinctly bad behaviour”.⁹ Examples of the latter were:¹⁰

(a) making allegations of fraud knowing them to be false;

(b) particular misconduct causing loss of time to the Court and other parties;

(c) commencing or continuing a proceeding for some ulterior motive;

(d) doing so in wilful disregard of known facts or clearly established law; and

(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions – i.e. persisting in what should on proper consideration be seen to be a “hopeless case”.

4. Andrew Beck and others McGechan on Procedure (Thomson Reuters, online ed) at [HR14.6.03(1)(a)].

⁵ AFI Management Pty Ltd v Lepionka and Company Investments Ltd [2018] NZHC 1285.

⁶ High Court Rules 2016, r 14.6(4)(a).

⁷ Rule 14.6(4)(f).

⁸ Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

⁹ At [26].

¹⁰ At [29].

[17] As is evident from the above, indemnity costs are reserved for egregious conduct.

Discussion

Banding for trial staging applications

[8] The Ministry seeks costs on the trial staging applications on a Category 3C basis. The Ministry submits that formulating a suggested approach to staging a proceeding of this magnitude was a complex exercise and required detailed consideration of the scope and nature of the evidence the Ministry would call. It also submits it required extensive research into approaches taken to staging large-scale litigation in overseas jurisdictions, where large product liability claims are more routinely before the courts.

[9] The Ministry further submits Carter Holt’s own application required a detailed response and opposition. It says “unpicking” Carter Holt’s proposal was a time- consuming exercise. The Ministry notes Carter Holt filed six separate affidavits in support of that application, all of which had to be considered and, where necessary, responded to.

[10] Carter Holt, on the other hand, submits these interlocutory applications were not especially complex or time-consuming such as to warrant a banding for all steps of Category C. It says that when the applications are looked at closely, no particular step taken by the Ministry required a “comparatively large amount of time” for the purposes of r 14.5(2)(c). It notes that no evidence was filed in support of the Ministry’s application, but rather two affidavits were filed by the Ministry in reply to Carter Holt’s evidence. It also says that while the parties’ written submissions were somewhat longer than the default 10-page limit, their length was not out of the ordinary in the context of any interlocutory application of importance in high value civil litigation.

[11] These proceedings have been categorised as Category 3 for cost purposes. As I observed in an earlier judgment, the proceedings are “extremely large, probably the
largest claim currently before the High Court”.¹¹ It does not necessarily follow, however, that Band C ought to apply to all steps in the proceeding, or even all steps for which costs are allocated on an interlocutory application. As Carter Holt submits, each step must be considered separately and may attract different bandings for costs purposes.

[12] I am satisfied an appropriate outcome on both applications is that band B applies to all steps other than preparation of submissions, which are appropriately awarded on a band C basis.

[13] I accept Carter Holt’s submission that while these proceedings are very complex, the formulation of the separate question on the Ministry’s approach and the response to Carter Holt’s proposal were not particularly complex, at least when compared to similar applications for separate questions in large commercial litigation. Further, the Ministry did not file a significant volume of affidavit material on these applications. The Ministry’s own evidence was not out of the ordinary when compared to similar interlocutory applications.

[14] I accept, however, that given the nature of the proceeding and the fact large- scale product liability claims in negligence are not routinely before the courts in this jurisdiction, the legal aspects of the application, including research and consideration given to international jurisprudence, take this matter into band C for legal submissions.

[15] Accordingly, on the Ministry’s application for determination of a separate question and Carter Holt’s application for trial staging, there are costs orders in favour of the Ministry on a 3B basis, save for the preparation of legal submissions, which are awarded on a 3C basis.

[16] For completeness, I do not accept the length of the written submissions will ordinarily be an appropriate guide or relevant factor to banding for costs purposes on interlocutory applications. In theory at least, all written submissions on interlocutory applications will be no more than 10 pages in length. And, it is not the length of the written submissions per se which is determinative, but the complexity of the issues to

¹¹ Ministry of Education v James Hardie Ltd [2018] NZHC 1481 at [4].

be determined and the time involved in preparing and formulating the arguments reflected in those submissions.

Ministry’s indemnity costs on its strike out application

[17] As noted above the Ministry claims indemnity costs on its strike out application.

[18] The Ministry submits I ought to order indemnity costs given Carter Holt maintained an affirmative long-stop defence notwithstanding the Supreme Court’s determination on that issue earlier in this proceeding. Relying on observations of the Court of Appeal in Bradbury v Westpac Banking Corp,¹² the Ministry says that despite the clear observations of the Supreme Court in its strike out judgment, Carter Holt maintained aspects of its pleading and only agreed to remove the relevant aspect of its pleading when it filed its notice of opposition on 21 November 2017.

[19] Carter Holt does not address the Ministry’s arguments about the long-stop defence in its costs submissions.

[20] I accept the Ministry’s position that it ought not to have had to bring an interlocutory application to address these particular aspects of Carter Holt’s pleading. However, given it brought an application to strike out other aspects of Carter Holt’s pleadings, any additional work on this aspect of the application would have been, in my view, relatively modest. In these circumstances, I consider the appropriate approach is for an equally modest increase to scale costs to reflect this aspect of the Ministry’s application.

[21] In relation to the second aspect of the Ministry’s strike out application,¹³ I am not persuaded indemnity costs are appropriate. I accept Carter Holt’s submission that a finding that a part of a pleading amounts to an abuse of process for the purpose of the Court’s strike out jurisdiction is, without more, not sufficient to warrant indemnity

¹² Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400.

¹³ Namely applying to strike out Carter Holt’s pleading that further and better particulars of the Ministry’s claim were required, against the backdrop of the parties having agreed no further particulars were required.

costs. The focus must be on the conduct of the party opposing costs or the manner in which it defends such an application, which might justify indemnity costs. A mere finding of abuse of process does not do so. Were that to be the case, then many strike- out applications resolved on the basis that a claim (or an aspect of it) is an abuse would, without more, automatically attract indemnity costs.

[22] I do not accept Carter Holt’s submission that the passage of time and changes in circumstances since the parties agreed no further particulars were required justified reconsideration of the question of particulars (at least as between the parties). Nevertheless, argument on the application appropriately ventilated the need for the Ministry to provide particulars of its loss in due course. In addition, the issues and arguments on the application were not as straightforward as might have been expected if the argument was “hopeless” from the outset. In all of the circumstances, I consider a scale costs award on a 3B basis is appropriate, with the modest increase referred to above.

[23] On the Ministry’s application to strike out aspects of Carter Holt’s pleading, I award scale costs on a 3B basis, uplifted by 20 per cent.

The recall application

[24] Again, the Ministry seeks indemnity costs on this application. It notes that in response to Carter Holt’s application, work was undertaken to respond to that application as a matter of urgency. It says unnecessary resources were expended on an application which was then abandoned. It submits (though does not reference any authorities) that unmeritorious applications for recall are an abuse of the court’s process. The Ministry says it incurred approximately $6,500 in responding to the recall application and seeks recovery of those costs in full.

[25] Carter Holt says there is no basis upon which to award indemnity costs. It submits it formed a view the judgment ought to be recalled to seek a minor clarification in respect of one specific passage, and that the particular steps taken by Carter Holt in this regard were appropriate and reasonable in the circumstances. After initial engagement with the Court and the Ministry on the application, and for what it says are reasons unconnected with its underlying merits, Carter Holt formed the view not
to pursue it. It also submits that the costs claimed cannot be justified as reasonable actual costs in any event, when a 3B scale entitlement for steps taken in relation to the application (appearance at a telephone conference) are limited to $990.00.

[26] Again, I am not persuaded Carter Holt’s conduct in relation to the recall application falls within the category of conduct reserved for indemnity costs. Without having determined the recall application, it is also not appropriate to form what is effectively a final view on its merits for the purposes of costs. I do not agree, however, that any scale costs awarded should be limited to the telephone conference before the Court. There is no doubt that, while a formal notice of opposition and evidence was not required from the Ministry, it would have had to have taken some additional steps to consider the recall application, engage with Carter Holt on it and prepare and file memoranda for the telephone conference.

[27] To reflect the steps required in addition to the telephone conference, I consider the appropriate approach is to award costs to the Ministry on a scale 3B basis, with reference to the step of a telephone conference, though uplifted to reflect the additional work involved. There is accordingly an order of scale 3B costs in relation to Carter Holt’s application for recall, increased by 50 per cent to reflect additional work that was no doubt undertaken by the Ministry in response.

Discount for Carter Holt’s partial success

[28] As noted above, Carter Holt seeks a 25 per cent “in the round” discount across all costs awarded to the Ministry, to reflect Carter Holt’s submission that it enjoyed a measure of success on the matters addressed in my judgment. It points to the fact that its application for leave to commence a counterclaim against the Boards of Trustees was opposed by the Ministry, but Carter Holt was successful in its entirety. It also notes that while no formal orders were made in relation to its application for directions relating to contributory negligence defences, its application led to an agreed position being reached through discussion at the hearing.

[29] The Ministry submits these aspects of Carter Holt’s application were so minor in the context of the remaining matters considered at the hearing and in the judgment that they ought not to have any bearing on the costs award. It also notes that but for
the question of leave to file a counterclaim, the position on the directions sought by Carter Holt was agreed by the parties. It submits its opposition to the application for leave was entirely appropriate given the very lengthy delay in filing the counterclaim, which was recognised in the judgment by the observation that the reasons given for the delay were not particularly convincing.

[30] I am not satisfied Carter Holt’s success on these matters, albeit minor, should have no impact on costs. While I accept these issues were relatively minor in the context of the other matters considered at the hearing, there is no doubt they would have attracted some actual time and cost in dealing with them. Further, the agreed position reached between the parties on certain matters was a result of discussion and agreement in the lead up to and at the hearing itself, which may not have occurred had the application not been brought.

[31] I therefore consider a relatively modest discount to the costs to be awarded to the Ministry ought to be made to reflect Carter Holt’s partial success on its own application. I do not accept, however, this ought to be as high as 25 per cent, or across all costs awarded to the Ministry. Ultimately, those matters on which Carter Holt was successful were a small part of its own application for trial directions. They did not form part of the Ministry’s own application for determination of a separate hearing or the Ministry’s application to strike out aspects of Carter Holt’s pleading. Nor were they related to the recall application.

[32] I accordingly conclude the appropriate approach is to discount the costs awarded the Ministry on its (largely successful) opposition to Carter Holt’s interlocutory application for trial directions. Given the relatively modest time and effort spend on those matters on which Carter Holt was successful, a discount of 10 per cent to the costs awarded to the Ministry on Carter Holt’s application is an appropriate outcome.

Disbursements

[33] The Ministry also seeks recovery of various disbursements. Carter Holt accepts those disbursements are appropriate. I agree.

Conclusion

[34] I accordingly make orders for costs and disbursements of $50,388.00 in favour of the Ministry as set out in the attached schedule.

[35] By consent, I also make an order that Carter Holt pay the Councils the sum of
$14,465.00 by way of costs.














Fitzgerald J

Step	Description	Band	Days	Amount
Costs
Costs claimed
22	Interlocutory application by plaintiffs for determination of separate question	B	0.6	$1,980.00
23	Plaintiffs’ notice of opposition to Carter Holt’s application for directions (less 10 per cent discount)	B	0.6	$1,782.00
24	Preparation of written submissions in support of separate question application	C	3	$9,900.00
24	Preparation of written submissions in opposition to Carter Holt’s application for directions (less 10 per cent discount)	C	3	$8,910.00
25	Preparation by applicant of bundle for hearing	B	0.6	$1,980.00
26	Appearance at hearing of defended application for principal counsel		1.5	$4,950.00
27	Second counsel		0.75	$2,475.00
Application to strike out part of Carter Holt’s defence
22	Interlocutory application by plaintiffs (plus 20 per cent increase)	B	0.6	$2,376.00
24	Preparation of written submissions (plus 20 per cent increase)	B	1.5	$5,940.00
Recall application
13	Appearance at case management teleconference (plus 50 per cent increase)	B	0.3	$1,485.00
Disbursements
9(c)	Interlocutory application filing fee (separate question)			$500.00
9(c)	Interlocutory application filing fee (strike out)			$500.00
14(c)	Notice of opposition to application for directions			$110.00
	High Court hearing fee			$4,800.00
	Expert affidavit of Greg O’Sullivan			$2,700.00
Total costs				$42,273.00
Total disbursements				$8,610.00
Total award				$50,388.00