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Easton Agriculture Limited v Manawatu-Wanganui Regional Council HC Palmerston North CIV-2008-454-31 [2011] NZHC 2027 (22 December 2011)

Last Updated: 11 February 2012

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

_{CIV-2008-454-31}

BETWEEN EASTON AGRICULTURE LIMITED First Plaintiff

AND EVELEIGH FARMING COMPANY LIMITED (IN RECEIVERSHIP) Second Plaintiff

AND MANAWATU-WANGANUI REGIONAL COUNCIL

Defendant

Counsel: J O Upton QC with M S Dobson for Plaintiffs

D J Heaney SC with S H Macky for Defendant

Judgment: 22 December 2011

JUDGMENT OF THE HON JUSTICE KÓS (Costs)

Introduction

[1] On 17 February 2004 a floodway stopbank on the Manawatu River, near Foxton, failed. Nearby croplands owned by the plaintiffs were flooded. The plaintiffs brought proceedings against the defendant Council in negligence, private nuisance, Rylands v Fletcher and breach of statutory duty.

[2] My judgment of 7 September 20111 determined that s 148(1) of the Soil Conservation and Rivers Control Act 1941 excluded claims against the Council other than in negligence. I found the Council owed the plaintiffs a duty of care in monitoring and maintaining the floodway stopbanks. I found, also, that the Council had breached that duty by failing to identify and repair a gap between a road bridge

_{and the stopbank crest, in which cement bags had been inserted as a seal. The}

1 Easton Agriculture Limited v Manawatu-Wanganui Regional Council HC Palmerston North

CIV-2008-454-31 7 September 2011.

plaintiffs’ case had very much, indeed almost exclusively, focused on that gap as causative of the stopbank failure.2 However, the plaintiffs failed ultimately to prove that the presence of the gap (or any other deficiency attributable to the Council) caused the failure that occurred in the stopbank. Rather, the failure was caused by factors independent of the gap for which the Council could not have been liable. The bank was failing immediately upstream of the bridge some hours before the bank

gave way altogether. That occurred some 6-10 metres downstream of the bridge. The floods that damaged the plaintiffs’ crops would, therefore, have occurred regardless of whether the gap under the bridge was present or not.

[3] At [226] of my judgment I held the Council was entitled to costs on a category 2 basis. If the parties were unable to agree to costs, counsel were to file memoranda.

[4] Some agreement has been reached. The parties have agreed scale costs calculated on a category 2 band B basis would total $93,000.3 They appear to have agreed that band B is appropriate overall. The parties have also agreed on the defendant’s non-witness disbursements, calculated at $11,746.

Issues

[5] There are four issues for determination:

(a) Is the successful defendant entitled to an uplift on scale costs (i.e. increased costs) on the basis of the plaintiffs’ refusal to accept a pre- trial settlement offer?

(b) Should scale costs payable by the plaintiffs be reduced?

(c) What proportion of the defendant’s witness fees and expenses ought

_{to be paid by the plaintiffs?}

2 _{See judgment at [80], [146]–[151],}

3 However, the plaintiffs argue there should be a reduction in scale costs. See [24]–[31].

(d) Should the second plaintiff’s receiver, Mr John Fisk, be personally liable for costs?

Issue One – Increased Costs

[6] On 19 April 2011 – following the exchange of evidence but six weeks before trial - the Council wrote to the plaintiffs. The letter made a walk-away offer to settle. The letter stated:

The primary purpose of this letter is to set out for you the council’s position regarding the claims in some detail so that you and your clients can make a sensible and informed appraisal of their prospects of success at trial.

The secondary purpose of this letter is to illustrate to the trial judge, if that becomes necessary, that the council has taken a responsible approach to the claims made in setting out its position and that if the council is put to the expense of having to defend its position at the hearing that the council ought to be awarded increased costs.

[7] The letter went on to set out the Council’s position regarding the plaintiffs’ claims. Ultimately it was correct in its prediction as to the application of s 148, but wrong as to whether it had breached its duty of care to the plaintiffs. (It seemed, by omission, to accept that it owed such a duty.)

[8] As to causation, the letter said:

Your clients and their experts have to date made much of whether or not a gap existed between the top of the stop bank and the underside of the Whirokino trestle bridge. There is no evidence of the existence of a gap.

Even if there was some evidence of a gap, that provides no assistance whatsoever to your clients. That is because the council’s inspection and maintenance regime was more than adequate and as you can see from the evidence, the council was not aware of the existence of any gap.

Furthermore, the situation with the underside of the bridge did not cause the stop bank breach to occur as is clear from the evidence. The stop bank breach occurred approximately 6 metres downstream from the centreline of the bridge.

[9] The letter finished in this way:

There is no prospect that your clients will succeed against the Council.

Between now and the end of the hearing, the Council will incur significant legal and expert costs in running its defence of your clients’ claims. On a 2B basis, as at today the council is entitled to an award of costs in its favour of

$32,524.00.

We are instructed by the council that it would agree to your clients’ discontinuing their claims on the basis that the council will not seek costs from your clients. This offer must be accepted prior to 5pm on 28 April

2011.

As noted above, we are instructed that if your clients choose not to discontinue their claims then we are instructed to place this letter before the trial judge when the matter of costs is dealt with in support of an award of increased costs in favour of the council.

[10] The offer expired without any substantive response from the plaintiffs on

3 May 2011. The Council now seeks increased costs on the basis of this refusal.

[11] The power to award increased costs is found in High Court Rule 14.6. The relevant part of this rule provides:

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

...

(b) the party opposing costs contributed unnecessarily to the time or expense of the proceeding or step in it by –

....

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

[12] The onus is on the party claiming increased costs to persuade the court the award is justified.4 That party must satisfy the court that the failure to accept the offer of settlement was unreasonable. The reasonableness of a rejection must be assessed at the time of rejection, not just against the subsequent result.5 If an award

_{of increased costs is made, the correct approach is to uplift from the scale costs.}6

4 _{Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011.}

5 New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548

_{19 August 2010.}

6 Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA).

[13] The Council submits the offer made was a better outcome for the plaintiffs than that achieved at trial. As a result of its rejection, significant costs were incurred in defending the claim. Further, it submits the rejection was unreasonable at the time: briefs of evidence had been served, and the defences were canvassed clearly in the offer. A 50 per cent uplift is sought on the steps taken after 3 May 2011. Those steps are $59,220 at scale. A further 50 per cent, or $29,610, would increase costs from the agreed scale sum of $93,000 to $122,610.

[14] The plaintiffs oppose. They submit rejection of the offer was reasonable as, without testing the evidence through cross-examination and expert caucusing, it could not be said there was no seriously arguable case. Critical and important concessions, and consensus, emerged during caucusing.7 The walk-away offer effectively rejected the existence of any litigation risk for the Council. To put it another way, it ranked the plaintiffs’ chances of success “at zero percent”. That was

not a reasonable assessment, and the plaintiffs were not unreasonable in taking the view that it was not a reasonable assessment. The plaintiffs also submit the Court should exercise its discretion in their favour for these reasons: the proceedings gave rise to complex factual and legal issues which required resolution; something more than a mere failure of factual or legal argument is necessary to justify increased

costs;8 and allowing increased costs in any case where there is a settlement offer

would be inconsistent with the principle of access to justice as it would deter plaintiffs irrespective of the strength of their case.9

7 At [207] I noted that through caucusing all experts agreed that the cement bags ( see [2] above)

may still have been in place at the time of failure of the stopbank downstream of the bridge at

6.30am. That concession was, of course, contrary to the plaintiffs’ case that the gap caused the

_failure.

8 _{Relying on Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676 13 July 2009.}

9 Relying on the principle in Oceania Furniture Ltd v Debonaire Products Ltd HC Wellington CIV-2008-485-1701 16 September 2010 that a successful Calderbank offer does not per se establish a right to increased costs.

[15] I am satisfied that this is not an appropriate case in which to award increased costs under HCR 14.6(3)(b)(v). Despite the ultimate result, it was not unreasonable for the plaintiffs to reject the defendant’s walk-away offer and proceed to trial.

[16] First, the Court is conventionally cautious in awarding increased costs where the successful party had made only a walk-away (or “drop hands”) offer. In Hira Bhana & Co Ltd v PGG Wrightson Ltd10 a walk-away offer was made by the defendant in August 2004. The proceedings went to trial in late 2005. The plaintiff lost. The Court of Appeal held that it was not unreasonable for the plaintiff to reject the walk-away offer. The credibility of witnesses was a crucial factor in that case. It

was not unreasonable to proceed to trial to test credibility. Pure New Zealand Foods Limited v Carter Holt Harvey Limited11 is another example. It is true that the offers in those cases were made at an earlier stage than in the present one. Making such an offer after the exchange of evidence allows the parties to assess their prospective positions more accurately. But, for reasons I am about to give, I do not think that makes a material difference here.

[17] Secondly, the reason the Courts take a conservative approach to imposing increased costs in the context of walk-away offers is that they effectively value the opponent’s claim, the opponent’s prospects of success, and their own litigation risk all at nil. As the plaintiffs put it in their submissions, it ranked the plaintiffs’ chances of success “at zero percent”. It will be a rare case where it is unreasonable for a plaintiff to take a more optimistic view of their own prospects than “zero percent”. It may be noted, also, that the plaintiffs were represented by very senior and able counsel.

[18] Thirdly, on the state of the case as it stood on 19 April 2011, it could not be said that the plaintiffs’ prospects of success were nil. Even with the benefit of

10 _{Hira Bhana & Co Ltd v PGG Wrightson Ltd [2007] NZCA 342.}

11 Pure New Zealand Foods Limited v Carter Holt Harvey Limited HC Wellington CIV-2004-485-

2747 17 December 2008.

hindsight, viewed as at judgment, the plaintiffs had a good case that the Council had acted negligently. The Council’s letter seems effectively to concede that it owed the plaintiffs a duty of care. It then correctly identifies the plaintiffs’ focus on the gap between the bridge and the cement bags.12 But it wrongly (as it turned out) denied there was such a gap. I found the Council’s evidence on that topic unreliable. The Council also wrongly denied negligence on the basis that it had an effective

maintenance programme. I found against it on that topic. That left causation only standing between the plaintiffs and an award of damages. I will discuss that in a moment. But the Council could not (or should not) sensibly have thought that its litigation risk was nil. The issue of causation was complicated. If nothing else, the level of the Council’s expenditure on expert evidence suggests that it did not think its litigation risk was nil. And if the Council did not hold, or should not have held, that view, then nor can it have been unreasonable for the plaintiffs to reject it.

[19] Fourthly, the issue of causation was (as I have just said) complicated. The complications were both factual (given that the defective stopbank disappeared in the flood, leaving nothing to inspect) and temporal (due to the elapse of time since

2004). Certainly causation was more complicated than the very brief discussion of that topic in the letter.13 For instance, the letter failed to discount the Council- commissioned Sutherland report, prepared immediately after the flood in 2004. That report offered some encouragement to the plaintiffs on causation.14 The letter was wrong, too, to focus exclusively on the 6.30 am downstream failure when that could not possibly explain the extensive flooding of Mr Stratton’s land prior to 2.00 am, the extent of which was both dramatic and dangerous by 3.00 am.15 Nor did that focus explain away the upstream failure some hours prior to the downstream failure.16

[20] The difficulties caused by the stopbank having been lost in the flood, and the passage of time, affected not only the plaintiffs (who bore the onus of proof). It

_{tended to give pre-eminence to the contemporaneous analysis in the Council-}

12 _{See [8] above.}

13 _{See the third paragraph quoted at [8] above.}

14 _{See judgment at [65]–[66].}

15 _{See judgment at [45]–[48].}

16 Discussed at [2] above, and summarised at [221] of the judgment.

commissioned Sutherland report. Certainly, the plaintiffs’ expert, Mr Williams, reposed more reliance on that report than the Council’s experts (Messrs Hamilton and Luxford) did. Quite properly their views (and those of Mr Williams) as to causation moved in the course of the hearing. They had to. The Council premise as to there being no gap at all was disproved by the plaintiffs’ witnesses, and cross- examination of the Council’s. The plaintiffs’ premise as to water “flowing” through

the gap17 was also disproved. Mr Hamilton’s theory as to a potential cause of the

downstream failure being an old telecom duct running through the stopbank was retracted by him on further reflection. Each of the experts was put to providing an explanation of the earlier upstream failure, which none of them had really focused on.18 Its importance was not really fully understood until the fact witnesses had finished giving evidence.

[21] All of this shows that the outcome of the causation issue was by no means pre-ordained. The Council’s litigation risk was not insignificant. It was not unreasonable for the plaintiffs to reject its walk-away offer ahead of trial.

[22] Accordingly, there will be no order for increased costs.

Issue Two – Reduced Costs

[23] The plaintiffs submit scale costs should be reduced. [24] High Court Rule 14.7(d) provides:

14.7. Refusal of, or reduction in, costs

Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if –

[....]

(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs.

17 _{Based on evidence by a fact witness, Mr Jamieson, which he retracted under cross-examination.}

18 The plaintiffs’ expert focused on the gap, and the geometry of the floodway; the Council’s

experts on the downstream failure at 6.30am.

Submissions

[25] The plaintiffs submit that the Council was unsuccessful in relation to Issues Two and Three of the judgment19 – whether they owed a duty of care in monitoring the stopbank and whether they were negligent. Drawing on Packing In (in liquidation) v Chilcott20 the plaintiffs assert they were therefore successful in relation to more than half of the issues considered. Further, a crucial issue in relation to Issue Three was whether there was a gap between the underside of the trestle bridge and the top of the stopbank. The plaintiffs submit the Council should not be entitled to scale costs on this issue as it was a matter which occupied a significant proportion of the evidence and increased the costs to both parties.

[26] The plaintiffs also rely on HCR 14.7(e). It provides costs may be reduced where the proceeding concerns a matter of public interest, and the party opposing costs acted reasonably in the conduct of the proceeding. They assert that although they were unsuccessful on causation, they reasonably sought expert opinion on the issue, advanced an arguable case, and only caucusing broke through its expert theory.

[27] Finally the plaintiffs submit the Council did not conduct the litigation reasonably, justifying a reduction in costs. The particulars of unreasonableness lie in the denial of the gap, and the retraction of the Council’s previous acknowledgment of the failure being a progressive one.

Analysis

[28] This is plainly not a case where it is appropriate to reduce scale costs, any more than it would be appropriate to increase them.

_{[29] I can state my reasons briefly:}

19 _{Issue Two is considered at [122]-[142]; and Issue Three at [143]–[195].}

20 Packing In (in liquidation) v Chilcott [2003] NZCA 124; (2003) 16 PRNZ 869 (CA) at [5].

(a) Reliance on the Packing In decision here is entirely misplaced. That case concerned discrete transactions. It concerned applications that voidable transactions not be set aside. Eleven of 14 transactions, worth $60,970, were not set aside. But three, worth $51,374, were and then had to be repaid to the respondent. Honours were roughly even.

(b) That cannot be said here, where the plaintiffs have failed altogether. It makes no difference that they succeeded on some essential steps in their negligence claim, when they failed on the final step. It may be noted, too, that the alternative causes of action in private nuisance, Rylands v Fletcher, and breach of statutory duty all failed in limine because of s 148.

(c) There is simply nothing out of the ordinary about the conduct of either party that would justify variation from the usual rule that costs follow the event.

(d) Again, it makes no difference to the costs outcome that the plaintiffs had expert advice in support, and an arguable case. That is merely the norm. Costs might have been increased had they not, as we have already seen. But their presence does not justify reduction.

(e) This is not a true public interest case justifying reduction under HCR

14.7(e). As the plaintiffs put it, candidly, in their submissions opposing increased costs, they “stood to recover $2,530,387 in damages by proceeding”.

(f) Nor would I find that in either respect advanced in [27] above did the Council conduct itself unreasonably. The first respect – denial of the gap – was advanced on the basis of evidence which ultimately was not sustained. The onus of proof on breach lay throughout on the plaintiffs. The Council was entitled to advance such contrary evidence as was available to it. To state the obvious, the reason for

such extensive focus on the existence of a gap was that the plaintiffs’ causation theory depended almost entirely upon it. But for that theory, which eventually was shown to be misconceived, less time might have been spent upon the gap. The second respect – progressive or discrete causation – is simply a reflection of the factual uncertainty as to causation that I have already discussed

[30] There is no basis for scale costs to be reduced in this case.

Issue Three – Witness Fees and Expenses

[31] There is disagreement over the recoverability of witness and expert costs incurred by the Council.

[32] The Council claims $126,882 for expert and witness costs. These costs comprise the following:

(a) David Hamilton – Expert – River Engineer: $36,751. Mr Hamilton gave evidence relevant to the standard of care to be undertaken by the Council, and to causation. His expertise was as a river engineer and consultant for various councils.

(b) Russell Ibbotson – Expert – Forensic Accountant: $46,421.

Mr Ibbotson was engaged to address quantum. By agreement the issue of quantum was reserved for further argument if required.

(c) Noel (Paddy) Luxford – Expert – Geotechnical Engineer: $40,156.

Mr Luxford addressed geotechnical issues surrounding the materials located in the stopbank adjacent to and underneath the trestle bridge, as well as causation of the flood.

(d) James Millner – Agricultural Expert: $2,685. Mr Millner’s evidence, like Mr Ibbotson’s, was directed to quantum and was not required.

(e) Graham Anderson – Factual witness: $1,242. Mr Anderson lives in Levin and incurred costs in travelling to the hearing. He was also paid $45 per hour for his time assisting on the case.

[33] In a second memorandum, the Council claims further disbursements of

$1,103 for factual witnesses’ travel and accommodation. The plaintiffs agree to pay these costs.

Submissions

[34] The Council submits that the fees of Mr Ibbotson and Mr Millner are recoverable notwithstanding their evidence was not required. They do not specifically address the criteria in HCR 14.12(2)(b)-(d) as to whether the remaining witness costs are specific to, and reasonably necessary for the proceedings, and reasonable in amount.

[35] The plaintiffs submit, first, that recoverability under HCR 14.12 is limited to disbursements incurred in respect of issues which the claiming party succeeded on. Accordingly, they ask for a 50 per cent reduction in witness costs to reflect the fact the defendant prepared a large proportion of its evidence in relation to issues it was unsuccessful on. Secondly, they submit a reduction is warranted as the defendant has not provided any basis on which the reasonableness of disbursements can be assessed or approved. In particular they submit Mr Ibbotson’s fees are excessive in the absence of narrations; Mr Luxford’s invoices contain no breakdown and minimal narration; and Mr Hamilton and Mr Luxford covered the same evidence, causation and negligence, which was unnecessary. It is submitted therefore that disbursements should not exceed $31,720.21, being 25 per cent of the amount currently claimed, i.e. a total 75 percent reduction.

Analysis

[36] Witness expenses, including expert witness fees, are recoverable as a disbursement pursuant to HCR 14.12.21 HCR 14.12(2)(a)(i) provides they must be

21 Progressive Enterprises Ltd v North Shore City Council [2005] NZHC 475; (2005) 17 PRNZ 919 (HC).

approved by the court as they are not specified in 14.12(1)(b). Further, they must be specific to, and reasonably necessary for, the conduct of the proceedings, as well as reasonable in amount.22

[37] I do not consider a reduction in costs in respect of Messrs Hamilton and Luxford can be justified. Their time was reasonably necessary for the conduct of the proceeding, and their fees are reasonable in amount. Although touching on some of the same matters, both provided crucial evidence for the proceeding. I found their evidence, and that of Mr Williams, particularly valuable. I did not sense that the presence of any of them represented surplussage. Rather each made a very helpful contribution to analysis of the technically difficult issue of causation. Mr Hamilton and Mr Williams were also very helpful on setting the appropriate standard of care. Although I ultimately disagreed with Mr Hamilton’s assessment, he was an excellent, even-handed expert witness who made concessions where appropriate.

[38] Mr Ibbotson gave evidence on quantum. The evidence of neither side on this issue was satisfactory. Both sides agreed with my suggestion that we put quantum to one side, and deal only with liability in this trial. It is perhaps unfortunate that this course did not commend itself to the parties earlier. Much cost could have been avoided. Witness expenses are recoverable in principle despite the fact that the Court finds it unnecessary to deal with the issue with which the evidence is

concerned, so long as the evidence was obtained reasonably and in good faith.23

That is certainly the case here. The question is whether Mr Ibbotson’s fees are reasonable in amount. I derived less help on the issue of quantum (before it was put aside) from Mr Ibbotson than, correspondingly, I did from Messrs Hamilton and Luxford on the issue of causation. He did less well under cross-examination. It is perhaps at the end of the day a matter of impression, but I consider Mr Ibbotson’s fee cannot in total be justified. I will certify for the sum of $30,000 instead.

_{[39] Mr Millner’s fee is modest and is confirmed.}

22 _{High Court Rule 14.12(2)(b)-(d).}

23 Beach Road Preservation Society Incorporated v Whangarei District Council [2001] 16 PRNZ

13 (HC) at [18].

[40] For the same reason that I declined to reduce costs, I decline also to reduce disbursements to reflect the fact the Council was unsuccessful on two issues within the head of negligence. That evidence was still specific to and necessary for the conduct of the proceedings, to respond to a case which at the end of the day failed. It would be entirely artificial to attempt to differentiate between the evidence given and to deduct a percentage figure to reflect that evidence I found helpful and that which ultimately I disregarded.

[41] Accordingly, the Council is entitled to the sum of $111,93724 in respect of witness fees and expenses.

Issue Four – Costs against receiver personally

[42] The Council seeks that the costs award be made against Mr John Fisk, the receiver of the second plaintiff, personally.

[43] The Council’s solicitors had put Mr Fisk on notice that if the claim failed, it would pursue him personally for costs.25 This notice appears to have been given after discussions regarding security for costs failed to make progress.

Submissions

[44] The Council relies on Cutting and Ors v Gould26 for the proposition that a receiver can be liable for non-party costs where put on notice. It does not expand upon that reference, or discuss either notice or necessity for the order at this stage.

[45] The plaintiffs submit that it would be unfair for the Court to order Mr Fisk pay costs. They submit that it has not been suggested that the plaintiff companies will not meet costs as awarded. The availability of security for costs is a “powerful” reason not to award non-party costs subsequently.27 It was reasonable to bring the

_{proceedings. They point, too, to the receiver’s limited and less active role in the}

24 _{Being the total of the sums in [33] and [34] after allowing for the reduction in Mr Ibbotson’s fee.}

25 _{In a letter dated 20 April 2011 – the day after the letter which is the focus of Issue One.}

26 _{Cutting and Ors v Gould HC Auckland CIV-2004-003957 2 June 2010.}

27. Relying on Poh v Cousins & Associates HC Christchurch CVI-2010-409-2654 4 February 2011 at [42].

proceedings – there were two plaintiffs and the company was only put into receivership during the litigation.

Analysis

[46] Costs may be awarded against a receiver in certain circumstances. The authorities are usefully gathered by Associate Judge Osborne in Poh v Cousins & Associates.28

[47] Liability of the receiver would be as a non-party. The fact that a corporate party has entered receivership during the course of a proceeding does not mean that the receiver is substituted as the party liable for costs. The corporate party continues to exist. The fact that it has entered receivership may justify an application for security for costs, or enlargement of a security order already made. The availability of a security order is a strong reason not subsequently to order costs against a non-

party.29

[48] The jurisdiction to award costs against a non-party arises both through the Court’s inherent jurisdiction and the wide discretion provided in HCR 14.1.30 As Tompkins J said in Carborundum Abrasives Ltd v Bank of New Zealand (No 2):31

Where proceedings are initiated by and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in their result, such as a receiver or manager appointed by a secured creditor, a substantial unsecured creditor or a substantial shareholder, it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or be discontinued. That will be so whether or not the person is acting improperly or fraudulently.

[49] There are in this case two reasons to pause before reaching a conclusion on the issue of whether the receiver of the second plaintiff should wear costs.

[50] The first is that an application on notice to the receiver needs to be made for that purpose. It seems to have been assumed here (by all parties) that such costs can

28 _{Poh v Cousins & Associates HC Christchurch CVI-2010-409-2654 4 February 2011 at [38]-[42].}

29 See Poh v Cousins & Associates HC Christchurch CVI-2010-409-2654 4 February 2011 at [42]

_{and the authorities there discussed.}

30 _{Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] 1 NZLR 145 (PC).}

31 Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 (HC) at 765.

be dealt with in the context of the current inter-party costs application. That is not so. That approach fails to recognise the special position in which non-parties stand. An application on notice is necessary to subject them to the Court’s jurisdiction in this proceeding.32 And the non-party is entitled to respond and be heard. The Court cannot simply assume that the second plaintiff is attending fully to the receiver’s interests, despite the inherent likelihood that that is so.

[51] Secondly, such application may well be premature. No order for security for costs was made in this case. The plaintiffs may meet the costs awards in their own right. Only if they do not is it really necessary to consider the appropriateness of a non-party costs order.

[52] I will reserve leave to the Council to apply subsequently, and formally, for costs against the receiver of the second plaintiff.

Disposition

[53] The defendant is entitled to the following:

(a) Scale costs, calculated on a category 2 band B basis, as calculated and agreed by the parties: $93,000.

(b) Non-witness disbursements, as agreed: $11,746. (c) Witness disbursements: $111,937.

[54] Leave is reserved to the defendant to apply for costs against the receiver of the second plaintiff.

Stephen Kós J

Solicitors:

Wadham Goodman, Palmerston North for Plaintiffs

_{Heaney & Co, Auckland for Defendant}

32 Black Trading Limited v Chandra HC Auckland CIV-2008-404-7202 15 December 2008 at [3].