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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2005-404-05070
BETWEEN PHOENIX ORGANICS LIMITED
Plaintiff
AND RD2 INTERNATIONAL LTD
Defendant
AND NATURES FOOD INGREDIENTS
LIMITED
Third Party
Hearing: On the papers
Appearances: PW Michalik for Plaintiff
GA Ireland for Defendant
GC Jenkin for Third Party
Judgment: 21 December 2005
JUDGMENT (No.2) OF COOPER J
ON COSTS
This judgment was delivered by
Justice Cooper on
21 December 2005 at 3.45 p.m., pursuant to
r 540(4)
of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Morrison Kent, PO Box 10-035, Wellington
Milne Ireland Walker, PO Box 4204, Auckland
Inder Lynch, PO Box 72-045, Papakura,
Auckland
Copy:
GC Jenkin, PO Box 2256, Shortland Street, Auckland
PHOENIX ORGANICS LIMITED V RD2 INTERNATIONAL LTD HC AK CIV 2005-404-05070
21
December 2005
[1] In my judgment delivered on 1 September 2005 I held that the plaintiff,
"Phoenix", was entitled to judgment
in the sum of $5,933 in respect of losses that it
had pleaded at paragraphs 78(a), (b) and (c) of the amended statement of claim.
I
held further that the defendant "RD2" was entitled to judgment in respect of the
balance of Phoenix's claim, and that RD2 was entitled
to judgment against Phoenix
in the sum of $41,664. I directed that I would receive memoranda from counsel on
the questions of costs
if they could not be resolved.
[2] I also invited memoranda from the third party, "NFI" and from "RD2" as to
whether any formal
relief was required in respect of RD2's claim against NFI. That
issue arose, because, as will be apparent from the substantive judgment,
the case of
those parties was essentially a joint one, and in factual terms the main issues that had
been advanced by Phoenix in
respect of the processing of feijoas related to work
carried out by NFI under contract to RD2.
[3] I have now received memoranda
in which:
a) both RD2 and NFI seek substantial awards of costs against Phoenix;
and
b)
Phoenix itself seeks a substantial award of costs on its claim.
[4] In order to set the rival claims for costs in context it
will be helpful to
reiterate the overall effect of the substantive judgment. Phoenix's claim against RD2
was based on alleged breaches
of the contract pursuant to which RD2 was to
manage, for Phoenix, the processing of feijoas into juice by NFI. As a result of the
alleged breaches of the contract, Phoenix claimed damages in the sum of $221,363.
By far the largest part of that claim was for loss
of profit, said to have been
$171,741. That claim, and a claim for juice purchased from third parties to reduce a
shortfall of the
juice which Phoenix said should have been produced in the
processing by NFI, were unsuccessful.
[5] The claims on which Phoenix
did succeed were for three heads of damage,
namely:
a) Juice lost as a result of over-filling of barrels - $2,502.
b) Fruit dumped due to failure to process in accordance with agreed time
line - $1,359
c)
Additional cool store costs required for backlog of fruit not processed
in accordance with agreed time frames - $2,072.
[6] The total, $5,933 was obviously a very small fraction of the total amount that
Phoenix had claimed. Moreover, the time spent
in the hearing dealing with the
matters on which Phoenix was successful was, as might be expected,
correspondingly small.
[7] By contrast, RD2 succeeded
in a counterclaim for $41,664. RD2's
counterclaim had sought judgment for two separate amounts. The first, in the sum
of
$37,006.16 had related to unpaid invoices concerning food and products supplied to
Phoenix unrelated to Phoenix's claim.
RD2 had asserted its right to have the
invoices paid by means of the statutory demand procedures under the Companies
Act. I declined
to issue judgment in respect of the amount claimed because Phoenix
had responsibly acknowledged that the money was owing, and had
undertaken to pay
it if the amount for which it obtained judgment in the present case was less than the
sum which it owed to RD2.
I observed in the substantive judgment that the invoices
in question had in the circumstances not been the subject of any inquiry
in the
present case and that all that needed to occur was for RD2 to apply to have the funds
held in Phoenix's solicitor's trust
account paid out to it, as had been envisaged by a
judgment delivered by Master Lang (as he then was) on 29 October 2003. Very little
time had been spent on that aspect of RD2's counterclaim in the hearing of the
present claim and I do not consider that its dismissal
should have any consequences
for the costs decisions that now need to be made.
[8] The second aspect of RD2's counterclaim concerned
a sum of $44,956.79 for
services rendered by RD2 concerning the subject feijoa processing contract. In the
result, I held that RD2
was entitled to judgment against Phoenix in the sum of
$41,664 on the counterclaim, having made some minor deductions in respect
of
some elements of the claim which were addressed at paragraphs [153]-[156].
The plaintiff's claim for costs
[9] Phoenix
claims costs against the defendant on the basis that it has secured a
judgment in its favour. Mr Michalik maintained that in the
circumstances costs
should follow the event in accordance with r 47(a) of the High Court Rules, and that
it should not matter that
it has succeeded in securing only a small award in its favour.
He submitted that the Court would not usually judge the plaintiff's
success by the
amount awarded in comparison with the amount claimed, that "vindication comes
from the fact of winning" and that the
Court should not adopt an issue by issue
approach, so that "a plaintiff who has sued on several causes of action and succeeded
on
at least one, is entitled to be regarded as the successful party".
[10] On that basis, Mr Michalik advanced a claim for costs
in the sum of $54,375
and disbursements (including hearing fees) of $17,955.
[11] That claim was resisted by Mr Jenkin on the
basis that the judgment sum of
$5,933 was a very small percentage of the total sum that had been claimed.
Mr Jenkin for NFI made
a similar submission.
[12] Rule 47(a) of the High Court Rules is commonly said to encapsulate the
principle that costs should
follow the event. However, as was observed by Tipping J
in Waihi Mines Ltd v Auag Resources Ltd (1999) 13 PRNZ 372, 373 the question
that must be answered is, what was the event? In that case the High Court had held
that costs should lie where
they fell in respect of litigation in which one party had
established that there had been a breach of contract, but there was no
resulting loss.
The Court of Appeal held that it was not possible to say in the circumstances that the
Judge had erred in principle.
Tipping J observed that:
[5] In circumstances such as the present, modern authorities concentrate,
amongst other
things, on determining who in reality has been the successful
party. In England the leading case is Anglo-Cyprian Trade Agencies
Ltd v
Paphos Wine Industries Ltd [1951] 1 All ER 873 (Devlin J). More recent
authorities are Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 All ER
685 (CA), and Oksuzoglu v Kay [1998] EWCA Civ 215; [1998] 2 All ER 361 (CA). In New Zealand
relevant High Court cases are Walsh v Kerr [1987] 2 NZLR 166, and Brown
v Dunsmuir [1994] 3 NZLR 485.
[6] A plaintiff who receives or is entitled to nominal damages will not
necessarily be regarded as a successful
plaintiff. Nevertheless, vindication of
a legal right without damages may carry an award of costs. Whether one or
other
of these approaches is adopted, or the middle ground of leaving costs
to lie where they fall, is ultimately a matter for the
discretion of the Judge,
upon an assessment of all relevant circumstances.
[13] In the present case the reality is that
the defendant succeeded in the
proceeding. The very small fraction of the award in favour of the plaintiff, compared
with the full
quantum of its claim, is one pointer in that direction. However, in
addition, and unsurprisingly, the issues on which the plaintiff
succeeded were dealt
with at the hearing in but a very small part of the overall time taken to hear the
evidence. Moreover, RD2 substantially
succeeded on its counterclaim. Overall, it
can be said that the defendant and third party won the principal contests of law and
fact.
I would characterise the "event" as one in which the plaintiff lost, and the
defendant succeeded.
[14] In Oksuzoglu v Kay [1998]
2 All ER Brooke LJ referred, at paragraph [57]
to a number of earlier authorities decided in England in which damages awarded had
fallen well short of the amounts claimed. At paragraph [58] he said:
In this line of cases, where the plaintiff only recovers
between 1% and 3% of
his original claim (sometimes, but not always, after a late amendment) the
court is entitled to
ask itself: `Who was essentially the winning party?' It
will not be distracted from making a just order as to costs by the
absence of a
payment into court which the plaintiff obviously would not have accepted ...
or where the defendants did
not have a proper opportunity to make a
payment into court which obviously would not have been accepted...
Although
all these cases are different, in the present case the substantial lis
between the parties on the trial of the preliminary
issues related to the big
claim on which the plaintiff wholly failed.
[15] In the present case, by far the most significant
aspects of the plaintiff's claim
were the claim for loss of profit, and the claim for replacement juice said to be
necessary to
supply a shortfall in the juice provided by NFI. The plaintiff's claim
under those heads totally failed. Both Oksuzoglu v Kay and
some of the cases to
which Brooke LJ had referred at paragraph [57] of his judgment in that case were
referred to, apparently with
approval, by Tipping J in Waihi Mines v Auag
Resources. Tipping J also referred to Walsh v Kerr [1987] 2 NZLR 166 and Brown v
Dunsmuir [1994] 3 NZLR 485 as New Zealand authorities which had recognised the
need to determine in a realistic way who had been the successful party.
[16]
I have no doubt on the basis of the approach enunciated in these cases that in
the present litigation, it is the defendant who
is to be characterised as the successful
party. Consequently, I decline to make any award of costs in favour of the plaintiff.
The defendant's claim for costs
[17] It necessarily follows from the conclusion just expressed that RD2 should be
entitled
to costs, although in fairness a small deduction should be made in respect of
the costs otherwise payable to reflect the fact that
Phoenix also achieved a very small
award.
[18] Mr Ireland, however, further submitted, on the basis of an alleged
"Calderbank
offer", that indemnity costs should be ordered in favour of the
defendant, in respect of steps taken after the letter had been sent.
[19] The claimed "Calderbank offer" was a letter dated 11 August 2004 that had
been sent by RD2's solicitors to the solicitors
acting for Phoenix on 11 August 2004.
In terms of the actual costs incurred by RD2 in respect of the litigation, some
$30,440 had
arisen prior to the making of the offer, and a further $68,350 was
incurred after it had been made. It was the defendant's submission
that the Court's
discretion should be exercised so as to order Phoenix to pay the defendant's actual
costs of $68,350 for steps taken
after the claimed "Calderbank offer" was made and
for costs on a Category 2 Band B basis to be awarded in respect of the steps prior
to
that date.
[20] The letter upon which the defendant relies was headed "Without Prejudice
Save as to Coats". It was in the
following terms:
We refer to your letter of 2 August and confirm that the offer contained
therein is rejected.
For the reasons indicated in the Statement of Defence neither our client nor
NFI believes that your client has a claim.
They have always offered to "re-
work" the juice supplied to remove the pulp and this offer remains open.
The recent
testing undertaken by RD2 and NFI confirmed that, contrary to
the indications given by your client, that the drums contain
substantial
amounts of usable juice.
In addition to the above offer if your client discontinues at this stage then
RD2 and NFI will not seek costs.
Your client will need to pay all outstanding amounts to RD2 including the
sum held in your trust account.
This offer remains open for 5 working days.
We look forward to hearing from you.
[21] Mr Michalik essentially makes two points in opposition to Mr Ireland's
submissions. First, he submits that the letter is
not in fact properly to be described as
a "Calderbank offer". It is simply a statement that the defendant and the third party
would
not seek costs if the claim were discontinued. His second point is that
Phoenix did in fact secure a judgment in its favour in the
sum of $5,933 and that
consequently, it has achieved an outcome significantly better than it would have
achieved had the defendant's
offer been accepted.
[22] In maintaining that the letter of 11 August 2004 should result in an order for
indemnity costs in respect
of the steps taken after the letter was sent, Mr Ireland
pointed out that the letter had been written well prior to the trial and
the plaintiff had
had ample opportunity to consider it. Furthermore, the letter was sent prior to briefs
of evidence being exchanged,
and had it been accepted at that stage, all parties would
have been saved the bulk of their costs in the litigation, incurred in
preparing for and
actually appearing at the trial. Again, Mr Ireland pointed out that although the letter
had not offered a sum of
money to the defendant, if the offer in the letter had been
accepted then Phoenix would have been in a much better position than
it is as a result
of the judgment. In this respect, it would have saved its own solicitor's costs in
proceeding with the claim, and it would have avoided any costs awarded against it
by the Court
in respect of the defendant or third party. In summary, the offer would
have been "more beneficial to it than the judgment it has
now obtained".
[23] Mr Ireland's submissions were prefaced by reference to r 48GA(4) and (5) of
the High Court Rules. Those rules
were inserted, as from 1 November 2004, by r 7
of the High Court Amendment Rules 2004. However, it is to be born in mind that
r 8
of the High Court Amendment Rules 2004 specifically provided that r 48G of the
High Court Rules (as in force immediately before the
commencement of the 2004
amendment) continued to apply to an offer under that rule made before 1 November.
The letter in question
was dated 11 August 2004, and accordingly its effect has to be
considered on the basis of the rules as they stood at that time.
[24] Rule 46G then provided as follows:
48G. Written offers "without prejudice save as to costs"
(1) A party
to a proceeding may at any time make to any other party to that
proceeding a written offer that
(a) Is expressed
to be without prejudice save as to costs; and
(b) Relates to any issue in that proceeding.
(2) The fact that
such an offer has been made must not be communicated to
the Court until the question of costs falls to be decided.
(3) The effect (if any) that the making of such an offer has on the question
of costs is at the discretion of the Court.
[25] No counsel referred me to any authority dealing with an argument that a letter
offering to waive a claim for costs if a proceeding
were discontinued should be
treated as a Calderbank offer, having the potential effect of increasing the costs
payable to the party
sending the letter if the offer were not accepted. Certainly, such
a letter would arguably be within the ambit of the words now used
in r 46GA(4)(b),
("an offer that would have been more beneficial to party B than the judgment
obtained by party B against party A").
As I have said, however, r 46GA(4) is not to
be applied in this case.
[26] What has to be applied in the present circumstances
is the previous rule,
including sub-rule (3) and its reference to the discretion of the Court. In principle,
and approaching the
matter as if the rules had not been amended, I doubt that the
letter was properly to be regarded as a Calderbank offer. The Court's
response to
such offers has generally been premised on a desire to encourage the settlement of
disputes. It is difficult to put a
letter that simply invites the plaintiff to abandon its
claim in that category. Secondly, however, it has to be remembered that the
plaintiff
did in fact secure a judgment in its favour after the trial, even though for far less than
it sought. In the 11 August
2004 letter, no payment was offered. In the particular
circumstances of this case, I do not consider that it would be right to accede
to the
argument advanced by RD2 that there should be indemnity costs for the steps
necessary after the letter was sent.
[27]
In my judgment of 1 September 2005 I held that costs should be calculated
on the basis of Category 2 Band B. Mr Ireland calculated
the entitlement of RD2, on
that basis, as $55,825. Mr Michalik did not challenge the basis on which that
amount had been calculated.
Mr Ireland sought, in addition, the payment of
disbursements (limited to a $65 filing fee) and recovery of the fees charged
by one of
RD2's expert witnesses, a Mr Lyne. Those fees were in the sum of $18,090.
[28] Mr Michalik submitted that Mr Lyne's
fees of $18,090 were unreasonable, a
submission primarily based on the scope of the evidence that he gave. Mr Michalik
contended
that a fee between $1,500 and $3,000 would have been more appropriate.
[29] Mr Lyne's evidence was directed at Phoenix's claim
for loss of profit and
essentially sought to criticise the method by which Phoenix had calculated that loss.
Because of the basis on which I determined that Phoenix could not
succeed on its
claim for loss of profits it was unnecessary for me to determine, in the substantive
judgment, whether there was substance
in the issues raised by Mr Lyne. However,
his evidence was plainly relevant to Phoenix's claim and would have assisted the
Court
to deal with the quantum of the claim had it been necessary to do so. I observe
further that he was a well qualified forensic accountant,
with the expertise
appropriate for the evidence he gave.
[30] Nevertheless, I hesitate to accept that there should be an order
that Phoenix
meet the full cost of Mr Lyne's involvement. Certainly, I think there is some merit
in Mr Michalik's criticism of
the amount RD2 claims having regard to the scope of
the evidence actually given, and the fact that, apart from making himself familiar
with the pleadings and the plaintiff's briefs of evidence, the only preparation
involved was in assessing Phoenix's sales for the
period from 1 February 2002 to 31
March 2004 and its profit and loss accounts. Added to these considerations must be
the comparatively
brief time that Mr Lyne's evidence took to give at the hearing, at
which he read a 12 page brief on which he was briefly cross-examined.
Considering
the position overall I am not prepared to allow more than $7,500 under this head.
[31] Consequently, the amount to
which the defendant is entitled for costs is the
sum of $55,825, $65 in respect of the filing fee, and $7,500 in respect of Mr Lyne's
fees, less the small deduction to which I have previously referred. I would assess the
latter at $1,000. The total sum that Phoenix
must pay to RD2 for costs and
disbursements is accordingly $62,390.
Increased costs
[32] Mr Jenkin, supported by Mr Ireland,
argued that Phoenix should pay
increased costs under r 46C(d) of the Rules. It was claimed that costs for preparation
for trial should
be calculated at the higher rate of Category 3 in Schedule 2, namely
$2,150 per day for 14 days. The result would be an increase
in the costs otherwise
payable by Phoenix of $9,800.
[33] The basis of this contention concerned the fact that a previous fixture
for the
trial had been allocated for 20 September 2004, but the trial had been adjourned due
to the personal circumstances of counsel
for Phoenix. In the adjournment, despite
the fact that the plaintiff had already served briefs of evidence for all its witnesses,
the plaintiff served amended briefs of evidence for all of its witnesses of fact and
supplementary briefs of evidence from the same
witnesses of fact. Mr Jenkin
contended that the supplementary briefs of evidence were not in fact supplementary
briefs,
but they contained large quantities of supplementary evidence. It was claimed
that this had increased the work involved in preparing
for the trial.
[34] The claim for increased costs was also advanced on the basis of a claim that
the plaintiff's case had changed
significantly part-way through the proceedings.
Reference was made to changes that had occurred in the pleading between the initial
statement of claim and its amendment. Then, reference was made to the fact that
additional work had been caused when Phoenix had
agreed to the suggestion made
by RD2 and NFI that the pulpy juice that had been frozen and retained should be re-
worked. It was
said that this had taken many hours and had involved both counsel
for the defendant and the third party, with a consequent increase
in costs. Finally,
reference was made to the fact that when the amended statement of claim had been
filed in June 2004 the claim
for lost profits in respect of potential Australian sales
had been abandoned.
[35] I am not satisfied that any of these matters
should result in any departure
from my ruling in the substantive judgment that costs should be dealt with on the
basis of Category
2. I observe that the categorisation of proceedings for the purposes
of costs under Schedule 2 to the High Court Rules is, pursuant to r 48, a process that
proceeds
according to the relative complexity of proceedings and the skill and
experience of counsel considered appropriate for the proceedings.
None of the
matters for which counsel have contended, as justifying increased costs in the
present case have any relationship to
the allocation of this proceeding to Category 2.
[36] Moreover, the rules as to cost recovery proceed on the basis that a proper
allowance for preparation will be made by allowing twice the time occupied by the
hearing, measured in half days. In that respect
there is no difference, under item 8 of
Schedule 3 between Bands A, B or C. Changes to a party's case commonly occur as
a matter
proceeds through its interlocutory stages and down to the trial. I do not
consider that anything unusual (still less exceptional)
has occurred here that would
justify increased costs.
The third party's costs
[37] Both RD2 and NFI submitted that an award
of costs should be made against
the plaintiff in favour of NFI. As an alternative, it was submitted that an order could
be made
requiring RD2 to pay NFI's costs, but on the basis that RD2's obligation
would be indemnified by Phoenix.
[38] In advancing those
contentions, Mr Jenkin for NFI pointed out that when the
substantive proceeding had been filed, the defendant and the third party
had reached
agreement to join forces to oppose the claim, and in doing so to save costs. As a
result of the co-operation between
RD2 and NFI, Mr Jenkin contended that
considerable time and money had been saved by all the parties, including the
plaintiff. He
referred to the fact that, as a result of the instructions that he had
received, he was in a position to announce at the outset of
the trial that if the plaintiff
should obtain a judgment in the proceedings against the defendant, then the third
party would consent
to judgment being entered in favour of the defendant against the
third party for the same amount, by way of a full indemnity. Consequently,
as the
trial progressed, there were no issues that needed to be resolved between NFI and
RD2, but both essentially called evidence
and made submissions directed against the
plaintiff's case. In the circumstances, although Phoenix had been held entitled to
recover
$5,933 plus interest from the defendant, as a result of the agreement reached
between RD2 and NFI, it had not been necessary for
any formal judgment to be
entered.
[39] Mr Jenkin submitted that the Court has power to award costs in favour of the
third party
against the plaintiff directly and he referred in particular to the decision of
Anderson J in Weir & Ors v Karam & Ors HC AK CP139/98
13 December 2000. In
that case, Anderson J said at paragraph [14]:
Presumptively the costs of the third parties, if payable,
should be paid by the
litigant who brought them into the case, that is the second defendant.
Counsel for the second
defendant submits that the nature of a plaintiff's
claim often makes it reasonable, if not necessary, for a defendant to bring
third party proceedings and that in the United Kingdom and Australia awards
of costs have been made against an unsuccessful
plaintiff in favour of a third
party. In Lombard Insurance Co. (Australia) Ltd v Mara Pastro & Others
SCGRG 93/1687,
30 March 1994, the Supreme Court of South Australia
held that where the nature of a plaintiff's claim or allegations in support
of it
render it reasonable, having regard to the purposes of third party procedure,
to bring in the third party, and
the third party claim is unsuccessful solely by
reason of a failure of the plaintiff to sustain its claim or the relevant
allegations, the defendant should ordinarily recover from the plaintiff the
costs of the third party claim, including
those which the defendant is ordered
to pay to the third party. The Court noted, however, that there is emphasis
on the word `ordinarily' and the discretion
is unfettered. A variety of factors
may properly enter into the exercise of it.
[40] I note that in Bennett Ltd v Reynolds
& Co. Ltd [1929] NZLR 119, Reed J
recognised that there was authority for an order to be made that the plaintiff should
pay a third party's costs although
he declined to do so on the facts before him. He
referred in his judgment to Morland v Hales 12 GLR 689 holding that it was an
express
authority that the plaintiff may be ordered to pay a third party's costs. I took
the view that such an order could be made in Mainland
Products Ltd v BIL (NZ)
Holdings Ltd & Others (No.2) HC AK CIV 2004-404-1889 21 October 2004. Such
an outcome, I think, must follow
inevitably now from r 46(1) which provides that
any matters relating to the costs of and incidental to a proceeding or a step in
a
proceeding are at the discretion of the Court.
[41] It follows, I think, from the passage that I have quoted from the decision
in
Weir & Ors v Karam & Ors that Anderson J also took the view that the Court's
discretion in relation to costs could be exercised
so as to make an award in favour of
a third party against a plaintiff. Anderson J, after the passage that I have quoted,
went on
to point out that an essential feature of the third party procedure was that it
permitted an issue estoppel to be created, not only
as between a plaintiff and a
defendant, but also as between a defendant and a third party, with the effect of
obviating the need
for a defendant seeking contribution or indemnity to relitigate the
issues relative to the plaintiff. He also pointed out, however,
that where that had
occurred, it would also often be possible for an order to be made severing for later
trial the dispute between
the defendant and the third party. He then said:
It follows that where there is a tenable claim by a defendant for contribution
or indemnity from a third party, it would be reasonable for the third party
procedure to be invoked. Whether that would
make it reasonable for the
plaintiff to carry the costs of the defendant's ancillary litigation is another
matter.
[42] In explanation of that comment, Anderson J referred to the position where
there are alleged joint tortfeasors, such as various
drivers who might have been
involved in a motor vehicle accident, where the joinder of one alleged tortfeasor by
another would be
prudent and reasonably foreseeable. On the other hand, where
causes of action were quite disjunctive, it would not be an appropriate
course. He
took the latter view in relation to the case which he in fact had to decide, in which
claims made by the plaintiff in
defamation were the subject of a third party notice
issued by the publishers against legal advisors who had read the book in question
and advised the defendant in relation to its contents prior to publication. Anderson J
held that there would have been no real disadvantage
to the publisher in waiting to
see what the outcome of the plaintiff's claim was before joining third parties in the
litigation.
He held in the circumstances that the defendant who had joined the third
party should carry the burden of the costs incurred by the
third party. It was
essential to his reasoning that any liability of the third parties to the defendant would
have been
on the basis that the alleged defamatory words were capable of being
defamatory and not the fact that the jury had found that the
words were in fact
defamatory.
[43] Mr Jenkin submitted in the present case, on the basis of Anderson J's
comments that joinder
of the third party by the defendant had been reasonable and
appropriate. It had been accepted by all the parties that the contract
for the
processing of the feijoa juice was between Phoenix and RD2, but RD2's
employment of NFI had occurred with the plaintiff's
express consent. There had in
fact been a joint meeting of all three parties prior to the commencement of the
contract. He contended
further that Phoenix would have had a cause of action in
negligence which it could have pursued against NFI on the basis that there
was a
sufficient degree of proximity between Phoenix and NFI, having regard to the
circumstances in which the contract between RD2 and Phoenix had been entered
into.
[44] In all the circumstances he maintained that this was clearly a case where
joinder of the third party had been justified,
and the outcome would give rise to an
issue estoppel as between the plaintiff and the defendant and the defendant and the
third party.
Further, the claims against NFI by RD2 were almost exactly the same as
the causes of action raised by Phoenix against RD2. In a nutshell,
he submitted that
the joinder had been justified on the basis that if the Court had found in favour of
Phoenix on the two main disputed
factual issues, and if the Court had entered
judgment for the full amount of the claim, it followed that the defendant would have
been entitled to a full judgment by way of indemnity against the third party. There
was in this case, no room for an argument that
the defendant should have waited for
the outcome of the plaintiff's claim before proceeding against the third party;
because the
two claims were "inextricably linked together".
[45] I accept that some of the language used by Anderson J in Weir & Ors v
Karam
& Ors, to describe the kind of case where an order might be made that a
plaintiff should pay a third party's costs, can be applied
to the present facts.
However, I doubt whether Anderson J was attempting to define in any
comprehensive sense the circumstances in
which an award would be appropriate.
Nor do I read his comments as indicating that such an award would always be
appropriate where
it could be said that the third party procedure had reasonably been
invoked.
[46] What makes the present case remarkable is the
degree to which there was
complete co-operation between RD2 and NFI, both as to the response of them both
to Phoenix's allegations,
and as to the extent to which resources were pooled in a
genuine attempt to avoid duplication by counsel in respect of cross-examination.
That reflected the fact that in substance, the plaintiff's allegations really turned on
the fundamental premise that NFI had negligently
performed the work of processing
the feijoas. I accept in the circumstances, as Mr Jenkin submitted (supported by
Mr Ireland for
RD2) that the third defendant had appropriately been joined to the
proceeding. The question of whether it is reasonable for the plaintiff
to carry the
costs of the third party, however, as Anderson J recognised in Weir, is another
matter. In this case, such was the extent
to which the defendant and third party
agreed on the position to be taken in response to the plaintiff's allegations, there is a
sense in which there must be doubt as to whether it was necessary for the third party
to be joined at all. In the absence of any
real dispute between the defendant and the
third party, their position could equally well have been served by a cost sharing
arrangement
between them and a co-operative effort to the defence of Phoenix's
claim by way of making available relevant NFI witnesses, without
the need for NFI
to have been joined.
[47] In circumstances such as this, there is, I think, some merit in Mr Michalik's
contention
that the plaintiff should not be liable to the equivalent of two sets of
defendant's costs, simply because the third party in effect,
by agreement with the
defendant, chose to stay involved in the proceeding and to act as if it had been
named as a second defendant.
As he pointed out, it was only RD2 that had brought
any claim against NFI, and neither NFI nor RD2 expended any effort or time on
the
hearing in relation to issues between those two parties. Indeed, as has been seen,
there were no such issues.
[48] In my
view having regard to the nature of the cases presented by NFI and
RD2, and the complete co-operation which their actions evinced,
there was in fact
little purpose served by their separate representation at the trial. While counsel acted
appropriately to avoid
duplication of effort, the fact is that the trial was inevitably to
some extent, lengthened by the process that was followed.
[49] In these circumstances,
I am not persuaded that it would be just for the Court
to order that Phoenix should be responsible for the payment of the full amount
of
NFI's costs, calculated under the rules, as Mr Jenkin urged. In fact, the only
amounts which I think should properly
be payable by Phoenix to NFI are the
disbursements which it incurred in terms of Court filing fees and the costs relating to
the
expert witness that it called to deal with the claim made by Phoenix that the
processed feijoa juice was of an unsatisfactory standard.
That witness, Mr Kime,
was an appropriately qualified expert and it was necessary for evidence of the kind
that he gave to be called
in defence of the claim. Requiring Phoenix to meet his
costs would involve no element of duplication of the kind criticised by Mr
Michalik.
The disbursements payable are $325 and the costs related to Mr Kime $13,710. I
consider that those costs are reasonable.
The total payable is $14,035.
[50] Having reached that point, I simply record that NFI has not sought that the
Court should make
an order requiring RD2 to pay its costs, except on the basis that
Phoenix should indemnify RD2 as previously mentioned.
Summary
[51] For the reasons I have given I resolve the questions of costs as follows:
a) Phoenix must pay RD2 its costs and disbursements
in the sum of
$62,390.
b) Phoenix must pay NFI its disbursements and the costs associated with
the evidence of Mr Kime,
a total of $14,035.
c) Phoenix's claim for costs is dismissed.
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URL: http://www.nzlii.org/nz/cases/NZHC/2005/463.html