Erwood v Holmes [2019] NZHC 2792 (31 October 2019)

Last Updated: 11 November 2019

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

CIV-2004-404-007211 [2019] NZHC 2792

BETWEEN	ROBERT ERWOOD Plaintiff
AND	JOHN ROBIN HOLMES First Defendant ANTHONY DAVID BANBROOK Second Defendant GRAEME EDWARD MINCHIN Third Defendant

Hearing:	On the papers
Judgment:	31 October 2019

JUDGMENT OF DOWNS J

(Costs)

This judgment was delivered by me on Thursday, 31 October 2019 at 11 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Kennedys Law, Auckland.

GE Minchin, Auckland.

Copy to: Plaintiff

ERWOOD v HOLMES [2019] NZHC 2792 [31 October 2019]

Increased costs?

[1] Mr Robert Erwood sued Mr John Holmes and Mr Graeme Minchin. He lost. Mr Minchin does not seek costs. Mr Holmes does—including increased costs. Mr Erwood opposes costs. Knowledge of my judgment dismissing Mr Erwood’s claim is assumed, albeit some recapitulation may be helpful.¹

[2] Mr Erwood lost money when Renshaw Edwards collapsed in 1992 (Mr Erwood was then known as Mr McDonald). Mr Erwood sued the New Zealand Law Society and an insurer. Failure against the latter outweighed success against the former. Mr Erwood then sued the lawyers who had acted for him, Mrs Raylee Harley and her firm, Glasgow Harley. Mr Erwood alleged negligence. Among other things, Mr Erwood argued Mrs Harley should have sought appointment of a litigation guardian for him. I call this the Glasgow Harley claim.

[3] In 2003, the Glasgow Harley claim settled with help from a litigation guardian, Mr Minchin. Mr Holmes was Mr Erwood’s solicitor for the Glasgow Harley claim. That said, Mr Holmes’ role was minor because he was reverse-briefed by a barrister and relied heavily on that barrister.

[4] Mr Erwood then sued Mr Holmes and Mr Minchin—the case I tried. Mr Erwood alleged Mr Holmes and Mr Minchin settled the Glasgow Harley claim without his authority. Mr Erwood said he did not actually need a litigation guardian and both men knew this. Mr Erwood relied on a 2003 letter written by a psychiatrist he had known for a long time. Mr Erwood also alleged Mr Holmes wrongly deducted his (modest) fee from the settlement proceeds, and the barrister’s (much larger) fee.

[5] I found Mr Holmes did not know about the psychiatrist’s letter until well after settlement, and Mr Holmes was entitled to deduct the fees. I also found Mr Minchin did not breach his obligations as a litigation guardian, and Mr Erwood was actively trying to circumvent Mr Minchin in that role.

¹ Erwood v Holmes [2019] NZHC 2049.

Mr Holmes’ case for increased costs

[6] Mr Holmes says he should have increased costs because of unnecessary delay, Mr Erwood’s conduct, and the latter’s unreasonable rejection of a settlement offer:

(a) Mr Erwood filed the claim December 2004. In 2007, Mr Erwood was made bankrupt. This stayed the claim until May 2011. In 2017, 2018 and 2019, Mr Erwood repeatedly applied for the appointment of amicus curiae. In effect, Mr Erwood wanted a free lawyer. When this failed, Mr Erwood repeatedly sought adjournments. These were declined 28 June, 31 July and 2 August 2019.

(b) Mr Holmes says Mr Erwood has been difficult to serve, and difficult to communicate with. Mr Erwood does not have an email address. He often claims not to have received documents (which he has received).

(c) On 12 July 2019, Mr Holmes offered to settle for $80,000. Mr Erwood rejected that offer.

[7] Mr Holmes argues costs should be increased by 25 percent from when the stay was lifted, then 50 percent from the rejection of the settlement offer.

Mr Erwood’s response

[8] Mr Erwood contests this analysis. He notes Mr Holmes applied to strike out the proceedings and failed. Mr Erwood says he progressed the case as best he could but was sometimes ill. Mr Erwood denies being difficult in relation to service. He notes he is not required to have an email address.

[9] Mr Erwood appears to suggest he did not receive the settlement offer. I say “appears to suggest” because Mr Erwood’s submissions on this point are difficult to follow. Mr Erwood says he wanted to settle and, in any event, should not be “punished” for not doing so.

Analysis

[10] Rule 14.6(3) of the High Court Rules 2016 provides:

14.6 Increased costs and indemnity costs

...

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

(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(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

(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; 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

(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; 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.

[11] As will be apparent, Mr Holmes’ case for increased costs in relation to his settlement offer reflects r 14.6(3)(v). The balance of Mr Holmes case for increased costs (see [6](a) and (b)) does not fit neatly into the scenarios articulated from r 14.6(3)(b)(i) through (v). However, r 14.6(3)(d) provides for increased costs for “some other reason”, and, Mr Holmes’ essential complaint is that Mr Erwood sued him for 15 years and was unreasonably difficult throughout. I have sympathy for this
argument but need not decide whether it is available under the rules. This is because I have no doubt increased costs are warranted in relation to Mr Erwood’s failure to settle and another aspect I consider fundamental: this claim should not have been brought. It was without merit and mischievous.

[12] The best way to explain is to begin with a decision of Ronald Young J in 2002 (which features significantly in my judgment).² Mr Erwood did not pay Mrs Harley’s and Glasgow Harley’s fee in relation to his suit against the New Zealand Law Society and the insurer. They obtained summary judgment. The case reached Ronald Young J. Mr Erwood argued he was mentally disordered when summary judgment had been entered, so no step should have been taken without the appointment of a litigation guardian. In short, Mr Erwood argued he should have had a litigation guardian when Mrs Harley and Glasgow Harley were seeking to recover their fees.

[13] Ronald Young J considered extensive material in relation to Mr Erwood’s mental health. The Judge noted Mr Erwood had made many applications of his own to courts: “Some have succeeded. Some have not. Some are clever and articulate and show an in-depth knowledge of legal procedure”.³ The Judge found Mr Erwood was not mentally disordered when summary judgment had been entered, and there was no basis to appoint a litigation guardian. The Judge then made this prescient observation: Mr Erwood “has used his mental illness at times in a highly manipulative way to advantage himself in litigation”.⁴

[14] I found Mr Erwood was doing just this by bringing this suit against Mr Minchin and Mr Holmes:⁵

... It is clear Mr Erwood was trying to circumvent Mr Minchin’s role, and equally clear Mr Erwood was again seeking to use his mental health for forensic advantage. Mr Erwood’s case against Mrs Harley and Glasgow Harley was that they failed him by not seeking appointment of a litigation guardian. Mr Erwood’s attempt to reverse summary judgment in relation to their fees relied on the same argument; that he was mentally disordered when summary judgment had been entered, and he needed a litigation guardian to protect his interests. Mr Erwood also relied on this argument in seeking court- appointed counsel. Mr Erwood’s attempt to personally enter settlement

² Glasgow Harley v Erwood HC Nelson CP22/98, 30 May 2002.

³ At [22](1).

⁴ At [29].

⁵ Erwood v Holmes, above n 1, at [66] and [75].

negotiations in relation to the Glasgow Harley claim is irreconcilable with his stance in these other cases, and at best, disingenuous behaviour.

...

A final observation on this topic. Mr Minchin testified that looking back, he believed Mr Erwood saw Dr Wettasinghe so that if he disliked the settlement negotiated by Mr Minchin and Mr Banbrook, he would have a possible way to overturn it. I share this view.

[15] I noted the High Court had twice declined to re-open settlement; the Court of Appeal too. It said Mr Erwood’s attempt to do so “smacks of abuse of the Court’s processes”.⁶ I also noted Mr Erwood’s contentions about service of the psychiatrist’s letter had “changed—and grown—as trial became imminent”.⁷

[16] My conclusion is not inconsistent with Mr Holmes’ failure to strike-out the suit.⁸ Mr Holmes’ primary argument was the causes of action could not be sustained. This did not require exploration of fact. Mr Holmes also invited attention to the possibility of an abuse of process. Associate Judge Sargisson was not persuaded that was evident from the papers. With the benefit of trial, it is clear the suit was on the cusp of an abuse. Again, Mr Erwood sought to use his mental health for forensic advantage. In N-Tech Ltd v Abooth Ltd, Kos J considered r 14.6(3)(b)(ii) extends to an unmeritorious claim.⁹ This is an obvious example.

[17] I am also satisfied costs should be increased because of Mr Erwood’s failure, without reasonable justification, to accept Mr Holmes’ offer of settlement. On 12 July 2019, Mr Holmes offered Mr Erwood $80,000.¹⁰ It is likely the offer was so generous—indeed gold-plated—because Mr Holmes wanted to end 15 years of start-stop litigation at the behest of a seemingly fixated, self-represented plaintiff with extensive court experience. It is reasonable to assume Mr Holmes found the case stressful. Most people do not like coming to court, still less being sued.

[18] I find Mr Erwood received the offer or at least knew of it. The offer was in writing. The associated letter is addressed to Mr Erwood at his usual, Wellington

⁶ Erwood v Glasgow Harley CA52/06, 11 December 2006 at [32].

⁷ Erwood v Holmes, above n 1, at [87].

⁸ Erwood v Holmes [2018] NZHC 2367.

⁹ N-Tech Ltd v Abooth Ltd [2012] NZHC 1167.

¹⁰ Mr Minchin offered $20,000.

address. The offer was made in the wake of an unsuccessful settlement conference, in relation to which Mr Holmes recorded (through a memorandum of his counsel) that he would “continue to explore options to settle the proceeding prior to trial”. Mr Erwood has a propensity to say he has not received important papers; something I commented on (adversely) in my judgment. Indeed, Mr Erwood sought more time to respond to costs; he said he did not receive Mr Holmes’ submissions.¹¹ This is not to “punish” Mr Erwood for not settling; it is to apply r 14.6(3)(b)(v).

[19] I summarise. Increased costs are warranted because Mr Erwood’s suit lacked merit and he unreasonably failed to settle.

[20] Scale costs are $42,303. I uplift by 25 percent from 31 May 2011 to 11 July 2019. The first date acknowledges activity after Mr Erwood’s bankruptcy stay was lifted.¹² I would have uplifted from inception, meaning, when Mr Erwood filed the claim (2004), but Mr Holmes does not seek that. This may be because, on one view, not much happened before 31 May 2011. The second date is when Mr Holmes offered to settle for $80,000. I uplift by 50 percent from then. This produces a figure of $57,947.50 (including disbursements of $1,244.75).

[21] A final observation in relation to costs. My conclusion might have justified indemnity costs. Mr Holmes did not seek these.

Mr Erwood’s application to recall the judgment

[22] On 1 October 2019, Mr Erwood applied to recall my judgment. I dismissed the application and said I would give reasons when I decided costs.

[23] Mr Holmes testified he was not a legal aid provider in 2003. After trial, Mr Erwood telephoned the Ministry of Justice under the Official Information Act 1982. Mr Erwood asked the Ministry if Mr Holmes was a legal aid provider at this time. The Ministry replied Mr Holmes was from November 2001 through to the end

¹¹ I gave more time. See Minutes: (No 2) of 19 September 2019 and (No 3) of 7 October 2019.

12. Mr Holmes refers to 14 October 2011 in his submissions as the first relevant date post-lifting of the stay. This appears to be a mistake.

of 2003. Mr Erwood argues Mr Holmes gave false evidence, and this information undermines my conclusion Mr Holmes was not then a legal aid provider.

[24] This aspect was one of six to my conclusion Mr Erwood’s legal advisors had not agreed to act for him on legal aid. And, Mr Holmes was being to ask to remember events 16 years earlier. Mr Erwood may pursue the point in the Court of Appeal. It is not sufficiently fundamental to warrant recall.

Orders

[25] I award Mr Holmes (increased) costs of $57,947.50.

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

Downs J