EVEREST AND BORNER V ROBIN SCHWASS CONSTRUCTION LIMITED AND ORS HC WN CIV-2005-485-849 [2005] NZHC 308 (30 November 2005)
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
CIV-2005-485-849
BETWEEN JON EVEREST AND HEIDI BORNER
Plaintiffs
AND ROBIN SCHWASS CONSTRUCTION
LIMITED
First Defendant
AND CHRISTOPHER ROBIN SCHWASS
Second Defendant
AND QBE INSURANCE (INTERNATIONAL)
LIMITED
Third Defendant
AND VERO LIABILITY INSURANCE
LIMITED
Fourth Defendant
AND MASTERBUILD SERVICES LIMITED
Fifth Defendant
AND AHI ROOFING LIMITED
Sixth Defendant
Judgment: 30 November 2005
In accordance with r540(4) I direct the Registrar to endorse this judgment with a
delivery time of 9.00am on the 30th day of November 2005.
JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL
[1] In a judgment I gave in this matter on 28 September 2005, I dismissed the
second defendant's application for summary judgment, reserved costs, and invited
counsel to provide memoranda as to costs, should there be disagreement between the
parties as to this issue.
EVEREST AND BORNER V ROBIN SCHWASS CONSTRUCTION LIMITED
AND ORS HC WN CIV-2005-485-849 30 November 2005
[2] The issue of costs has not been agreed. Counsel for the plaintiffs has
Filed memoranda as to costs on 19 October 2005 and 31 October 2005.
[3] Counsel for the second defendant has filed his memorandum on 26 October
2005.
[4] I now deal with the costs question on the basis of the memoranda that have
been filed.
[5] In his 19 October 2005 Memorandum, counsel for the plaintiffs, noting that
the plaintiff has been successful in opposing the defendant's application, seeks an
award of increased costs of $17,400.00 equating to actual costs incurred by the
plaintiff, plus disbursements. A detailed breakdown of this calculation has been
provided.
[6] This is opposed by the second defendant, who contends that costs should be
reserved to be set at trial by the Trial Judge.
[7] Rule 48E High Court Rules provides that unless there are special reasons to
the contrary, costs on an opposed interlocutory application are to be fixed when the
application is determined, and are to be payable at that time.
[8] Rule 48E(3) states, however:
(3) This rule does not apply to an application for summary judgment.
[9] In the commentary under Rule 142.7 Sims High Court Practice states:
HCR142.7 Costs
Rule 48E provides an exception in the case of summary judgments to the
usual rule that the costs of an opposed interlocutory application should be
fixed when the application is determined. When the application is successful
and this is a final determination of the proceeding, it is appropriate to award
costs to the successful plaintiff. See RR 46-48B and the Second and Third
Schedules, and the commentary to R 48E.
In NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA), the Court of Appeal
held that, if the plaintiff is unsuccessful in its application for summary
judgment, the usual course is for costs to be reserved. However, where
proceedings have been embarked upon erroneously or in full knowledge of a
bona fide defence, costs may be awarded against the unsuccessful plaintiff;
DB Breweries Ltd v Hsu (High Court Auckland, CP401/01, 1 March 2002,
Nicholson J). See also Air Nelson Ltd v Airways Corporation of NZ Ltd
(1992) 6 PRNZ 1 (CA).
Where the defendant's opposition to summary judgment is wholly
unmeritorious it may be appropriate to award costs exceeding a "reasonable
contribution": Trans Tasman Properties Ltd v Holmden Horrocks (High
Court Auckland, CP300/97, CP819/91, 11 September 1997, Master
Kennedy-Grant).
Where the defendant's application for summary judgment against the
plaintiff is opportunistic and fails to comply with the principles applicable to
such applications, the Court is likely to award costs and may in appropriate
cases award solicitor and client costs: Bernard v Space 2000 Ltd (Court of
Appeal, CA232/00, 5 July 2001); Eady v Dunsford (High Court Auckland,
CP501/99, 10 May 2001, Master Faire).
In Radio Tarana (NZ) Ltd v Moir (High Court Auckland, CP152/02, 15
November 2002) O'Regan J refused to award costs after dismissing an
application for summary judgment because the poor state of evidence
presented by the party opposing judgment contributed to the other party
believing the summary judgment was available.
[10] Heath J. in Wallace Corporation Ltd v International Marketing Corporation
Ltd (HC AK, unreported, CIV-2003-404-7227, 28 February 2005) a case involving a
plaintiff's unsuccessful application for summary judgment, discussed the NZI Bank
Limited decision of the Court of Appeal as confirming the normal practice to reserve
costs on summary judgment applications by plaintiffs, but then went on to state at
paragraph (14) of his judgment:
Nothing I say is intended to apply to a defendant's application for summary
judgment for which different considerations are relevant.
[11] Heath J. did not elaborate on this comment in his judgment.
[12] Subsequently, the issue of costs on a partially successful defendant's
summary judgment application came up for determination in Hornell Industries
Limited v Automated Sheetmetal Technologies Limited and Ors (HC AK, unreported,
CIV-2004-4004-4141, 15 June 2005, Associate Judge Sargisson). In that case the
Associate Judge, albeit with limited discussion on the point, found it appropriate to
follow the normal rule in NZI Bank Limited and order that costs on the defendant's
summary judgment application be reserved for trial.
[13] A different conclusion was reached, however, in Eady v Dunsford Marine
Limited (HC AK, 10 May 2001, CP501 SD99) Master Faire. There, in a situation
where the defendant withdrew applications for summary judgment against the
plaintiff, but not until the date allocated for their hearing, an award of costs in favour
of the plaintiff was made.
[14] And, in Bernard v Space 2000 Limited (CA232/00, 5 July 2001) the Court of
Appeal said at paragraph 39:
39. This Court in Kembla rightly discouraged opportunistic applications
by defendants pursuant to Rule 136(2). Where such applications fail
to comply with the principles which have been identified, defendants
can expect short shrift from the Court. In appropriate cases solicitor
and client costs may be awarded to the plaintiff to offset the
unnecessary costs which will have been incurred.
[15] In the present case, counsel for the plaintiffs in seeking costs, and at an
indemnity level, submitted that the second defendant's application for summary
judgment lacked merit, was unnecessary and should never have been brought.
[16] Counsel provided to me a range of Calderbank-type correspondence
Between the plaintiffs' solicitors and the defendants' solicitors both before the summary
judgment application was filed, and again before the hearing. In this correspondence
counsel for the plaintiff indicated that the outcome of the defendant's proposed
summary judgment application was inevitable in that it must fail and that his case for
summary judgment lacked any merit.
[17] These letters from the plaintiffs' solicitors were dated 16 June 2005, 17 June
2005 and 4 August 2005. The responses from counsel for the second defendant
were dated 30 May 2005, 16 June 2005 and 11 August 2005.
[18] The letters noted in the preceding paragraph were all marked "without
prejudice save as to costs" and relate generally to Rule 48G High Court Rules which
broadly recognises in the rules Calderbank offers.
[19] Rule 48GA states in part:
(1) The effect (if any) that the making of an offer under rule 48G has on
the question of costs is at the discretion of the Court.
[20] It is clear that Rule 48G encourages settlement negotiations
and offers by giving the Court a discretion to impose appropriate costs consequences McDonald v FAI (NZ) General Insurance Co.
Ltd (1998) 11PRNZ 531.
[21] This correspondence, in my view is quite significant here. The general
approach by the second defendant in this correspondence, as I see it, relies very
much on one earlier decision of this Court. As to this, the letter of 30 May 2005
from the second defendant's solicitor states:
It seems to me that my client's position is entirely similar to that of the
defendant in Drillien v Tubberty & Ors...In that case the defendant was
successful in obtaining defendant's summary judgment against the plaintiff.
[22] The plaintiffs' response communicated in this correspondence is broadly to
the effect that the Drillien decision was distinguishable from the facts of the present
case, given the personal involvement of the second defendant here in all areas of the
construction and repair process which resulted in the defects, and also his assumption of personal responsibility. Further, counsel for the plaintiffs noted that the second defendant's summary judgment application was entirely unsuitable here, given what was likely to be disputed facts and evidence.
[23] When asked by counsel for the second defendant to provide that evidence to
establish that the Drillien case was distinguishable from the present circumstances,
counsel for the plaintiffs in his 17 June 2005 letter set out in some detail four matters
to justify this, and attached supporting correspondence from James Hardie New
Zealand Limited and from the first defendant company. This drew no response from
counsel for the second defendant. The second defendant simply filed this summary
judgment application.
[24] Subsequently, on 4 August 2005 counsel for the plaintiffs in a further
"without prejudice save as to costs" letter suggested that the second defendant's
summary judgment application should at the very least be adjourned, given that, as
counsel noted in that letter:
...as discussed on Friday our clients will now pursue Masterbuild Services
for the full amount of repairs, general damages and costs under the
Masterbuild Services guarantee transferred to them by your client (now that
it is apparent that this is an unlimited guarantee). It is likely that the claim
between the plaintiffs and Masterbuild Services will be stayed to arbitration.
In that instance our clients propose that the High Court proceedings with the
remaining parties be adjourned pending resolution of the arbitration
proceeding. If our clients recover the full amount of their losses from
Masterbuild Services then we expect their instructions will be to negotiate
settlement with the other parties involved in the High Court proceedings on a
walk away basis with each party bearing their own costs.
And
We would seek an adjournment of the summary judgment application and
the High Court proceedings pending disposal of the arbitration proceeding
with any party reserved leave to bring the High Court matter back before the
Court upon two weeks notice.
[25] The response from counsel for the second defendant was simply to indicate
that the second defendant was proceeding with this application, and would seek
costs. As to that issue of costs, in his earlier letter dated 30 May 2005 counsel for
the second defendant had stated:
I anticipate that it will cost in the order of $15,000 to prepare and argue the
(summary judgment) application and if this is necessary our client will seek
increased costs on the basis of this open letter.
[26] As I have noted, in my view, this correspondence between counsel for the
respective parties is significant.
[27] Turning to my judgment dated 28 September 2005, in that judgment I noted
at paragraph [48]:
...the conclusion (is) that these types of action are generally unsuitable for
summary judgment.
[28] And, throughout that judgment I made it clear that the present case involved a
range of evidential matters which certainly would be the subject of considerable
dispute at trial. The enquiry as to whether a duty of care was owed by the second
defendant and whether it may have been breached would require thorough analysis
and testing of these contested facts, and therefore it needed the benefit of a full trial.
[29] That said, and given the need in a defended summary judgment application
for the defendant to overcome the significant burden of establishing that none of the
plaintiffs' causes of action could succeed, I am satisfied here that in the sense
mentioned in Bernard v Space 2000 Limited and Kembla, the present application by
the defendant under Rule 136(2) should be seen as simply opportunistic and
erroneously brought.
[30] The plaintiffs' through their solicitor made a number of Calderbank offers in
correspondence to the second defendant. They invited him specifically to withdraw
the summary judgment application, or to adjourn it pending separate determination
of issues with Masterbuild Services, should Masterbuild's claim be stayed to
arbitration. Clear statements were made by counsel for the plaintiffs
that a summary judgment application from the defendant was inappropriate here. Reference was made by the plaintiffs first to facts later disputed by the second defendant which
suggested personal involvement or personal responsibility by the second defendant
in this matter, and secondly to a range of authorities where applications of the type
threatened by the second defendant were declined, and costs orders made.
[31] Notwithstanding this, and in the face of clear warnings from the plaintiffs'
solicitor, the second defendant chose to proceed with his summary judgment
application.
[32] Counsel for the plaintiff seemed to rely almost entirely
on the decision in Drillien v Tubberty and Ors (HC AK, unreported, CIV-2004-404-2873, 15 February 2005, Associate Judge Faire). On the facts prevailing in that case, the Court found
that there was no direct personal involvement by the defendant director to the extent
necessary to establish a duty of care, and therefore the defendant director's summary
judgment application succeeded.
[33] But the facts here pointed out in counsel for the plaintiffs' Calderbank
correspondence were different to those in Drillien. And the references in that
correspondence to the opposite conclusions reached in the decisions in Maddren,
Carter and Banfield should have alerted the second defendant to the
inappropriateness of a summary judgment application here.
[34] As I see it, therefore, it is appropriate here for costs to be awarded now
against the unsuccessful second defendant. The costs incurred by the plaintiffs in
opposing this summary judgment application should not have been necessary. In my
view, this is an appropriate case for increased costs approaching solicitor and client
costs to be awarded to the plaintiff Bernard v Space 2000; Kembla, and Rule 48C
High Court Rules.
[35] I say this mindful, too, of the "warning" issued by the second defendant to
the plaintiffs in his solicitor's letter of 30 May 2005 (noted at paragraph [25] above)
that his costs on bringing a summary judgment application would be "in the order of
$15,000" and he would be seeking "increased costs" on this basis unless proceedings
against the second defendant were withdrawn within seven days.
[36] The plaintiffs seek total costs here of $17,400 calculated on the basis of
twelve days preparation at a category 2 daily recovery rate of $1,450.
[37] The hearing here occupied half a day. In my view, the plaintiffs' claim for
$17,400 as a reasonable contribution to costs is on the high side.
[38] Noting my comments at paragraph [35] above, I am satisfied that costs of
$15,000 are appropriate here.
[39] Costs of $15,000 are therefore awarded to the plaintiffs against the second
defendant, together with an amount for disbursements to be agreed between the
parties.
[40] Leave is reserved for either party to approach the Court further
if there is any disagreement or issue concerning the quantum of disbursements sought by the
plaintiffs.
Associate Judge D.I. Gendall
Solicitors: Parker & Associates, Wellington for Plaintiffs
Hazelton Law, Wellington for Second Defendant
Copy also to McElroys, Auckland for Third Defendant
J. Swan, P.O. Box 92055, Auckland for Fourth Defendant
Bell Gully, Wellington for Fifth Defendant
Meredith Connell, Auckland for Sixth Defendant