IN THE Court of appeal OF new Zealand
	
CA288/2014
[2015] NZCA 200

BETWEEN	
WAIMAKARIRI DISTRICT COUNCIL
Appellant	

AND	
KEITH FRASER GAULD
Respondent	

Hearing:	
30 April 2015	

Court:	
Harrison, Keane and Wylie JJ	

Counsel:	
F P Divich and A C Harpur for Appellant
K W Clay for Respondent	

Judgment:	
26 May 2015 at 3 pm	

JUDGMENT OF THE COURT
A	The appeal is dismissed. 
B	The appellant must pay the respondent indemnity costs calculated on a reasonable solicitor and client basis together with usual disbursements. 
____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)
Introduction
[1]	Following a trial in the High Court at Christchurch, Whata J entered judgment for Keith Gauld against Waimakariri District Council (WDC) for damages of $6,913.39.  The Judge found that WDC had negligently failed to issue a statutory rectification notice for Mr Gauld’s house.  But he reduced its liability by 25 per cent to allow for contributory negligence.  
[2]	In the normal course costs follow the event.  When giving judgment on liability Whata J provisionally observed that Mr Gauld should be entitled to costs on a 2B basis less 25 per cent.  Given the modesty of the damages award, it might have been expected that the parties would accept Whata J’s provisional view or agree on costs.  However, WDC sought a costs award against Mr Gauld on the ground that he acted unreasonably in rejecting its offer made on 26 March 2013, two weeks before the trial started, to settle his claim for $50,000.  WDC sought costs from that date of $18,275.22.  Mr Gauld maintained his claim for costs.
[3]	Whata J found for Mr Gauld and entered judgment in his favour for costs of $31,288 plus disbursements.  WDC now appeals against the costs judgment but not the liability judgment. 
High Court
[4]	Whata J identified the key issue as being whether WDC’s settlement offer of $50,000 had the effect of either disentitling Mr Gauld to costs either in full or in part or entitling WDC to its costs from the date of the offer.  
[5]	WDC’s offer was made in terms of r 14.10 of the High Court Rules.  Costs were thus governed by r 14.11 which materially provides:
14.11	Effect on costs
(1) 	The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
…
(3) 	Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A— 
	(a) 	offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
	(b) 	makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
(4) 	The offer may be taken into account, if party A makes an offer that—
(a) 	does not fall within paragraph (a) or (b) of subclause (3); and
(b) 	is close to the value or benefit of the judgment obtained by party B.
[6]	The Judge found that WDC’s offer triggered r 14.11(3) and r 14.11(4) (an increased offer of $100,000 was made on the eve of commencement of trial but the Judge’s finding that it was too late to be determinative of costs is not challenged).  However, Whata J was satisfied that justice would be done to both sides if Mr Gauld received at least some of his costs.  After taking into account a number of factors he granted Mr Gauld costs on a 2B basis but reduced by 35 per cent (10 per cent greater than his provisional figure).  This discount recognised WDC’s steps taken to resolve the proceeding before trial.  
Appeal
[7]	Ms Divich submitted that the Judge failed to give appropriate weight to WDC’s settlement offer of $50,000.  She relied upon the fact that the offer was for an amount greater than Mr Gauld actually recovered at trial.  In her submission, Whata J erred in principle in finding nevertheless that Mr Gauld should continue to receive at least some of his costs.  She did, however, accept that the effect of an offer made under r 14.10 is at the Court’s discretion; and that an offer, even if for more than the judgment sum, will not afford automatic protection from costs in the event of a lower recovery. 
[8]	In Ms Divich’s submission, the Judge erred also in giving weight to a number of other factors: namely, that the case was factually complex and involved novel questions of law; the complexity was a corollary of the nature of WDC’s breach and Mr Gauld’s vulnerability to dereliction of that duty; Mr Gauld’s success in establishing WDC’s breach; the existence of a public law element and benefit to the proceeding; and Mr Gauld’s fair expectation of an award of general damages which he took into account when assessing WDC’s offer.  
Decision
[9]	The only available ground of challenge is to the Judge’s threshold finding that WDC’s offer did not displace Mr Gauld’s entitlement according to the settled presumption that costs follow the event: or, as Mr Clay emphasised, that the unsuccessful party pays the successful party’s costs.  
[10]	The overriding principle is that all matters relating to costs are at the Court’s discretion, including the general rule that the offeror is entitled to costs on steps taken in the proceeding after a settlement offer is made if the sum offered exceeds the judgment sum. 
[11]	Whata J acknowledged that the timing and amount of WDC’s offer dictated either that it should be entitled to its costs after 26 March 2013; or that its existence should be taken into account in fixing costs.  He was satisfied that on 26 March 2013 Mr Gauld could have obtained judgment for a sum including costs and interest ranging between $49,345 and $36,712, both figures allowing for the later finding of 25 per cent contributory negligence.  On this assessment WDC’s offer marginally satisfied the r 14.11(3)(a) threshold.  In apparent recognition of this fine balance the Judge decided, in exercising his discretion, that Mr Gauld should continue to receive at least part of his costs.
[12]	Whata J, who enjoyed the special benefit of a full familiarity with all the facts and circumstances of trial, was satisfied that Mr Gauld should be awarded costs.  Ms Divich did not identify any error, either of law or principle in the Judge’s threshold approach to entitlement.  
[13]	Ms Divich focussed instead on a detailed factual and legal challenge to each of the other factors identified by the Judge.  But the weight he gave to these factors was entirely within his discretion.  On our assessment the principal factors, except perhaps the public law element of the claim and Mr Gauld’s expectation of general damages, were relevant and properly based in the evidence.  The Judge was entitled, for example, to find that the case was factually complex and involved novel questions, adding necessarily to Mr Gauld’s costs.  It is decisive that when balancing all factors (or, as he said, assessing costs “in the round”), and allowing for the steps actively taken by WDC to resolve the proceeding before trial, the Judge reduced scale costs payable to Mr Gauld by 35 per cent.  
[14]	Ms Divich did not identify any error by the Judge either in awarding Mr Gauld costs or in fixing the amount.
Costs
[15]	Mr Clay originally submitted that Mr Gauld’s costs should be increased in this Court for two reasons.  First, both parties were on notice of this Court’s approach that the assessment of costs is essentially a matter for the trial Judge and, in deference to the special advantage which he or she enjoys, this Court is slow to upset an award.  WDC’s appeal did no more than repeat or rerun its arguments advanced on costs in the High Court.  Second, and related to the first, on an objective analysis it was obvious that the Judge did not err in exercising his statutory discretion when fixing costs.  
[16]	In argument Mr Clay revised his submission to seek indemnity costs on the same two grounds.  We agree with him.  In our judgment WDC acted unnecessarily and unreasonably in bringing this appeal when it was on express notice of the requirement to satisfy a high threshold in establishing that Whata J erred in exercising his discretion. 
[17]	In particular we are satisfied that WDC’s approach to costs in the High Court and its reargument of its case under the guise of an appeal in this Court reflects a lack of objectivity and perspective.  In the High Court its counsel filed four separate memoranda on costs, the first comprising 54 pages with another 50 pages of annexures.  Ms Divich’s justification for WDC’s appeal was that its liability for costs raised an important issue or issues of principle.  However, the Judge’s approach in the High Court was no more than a standard example of applying settled discretionary principles to discrete facts and WDC’s argument on appeal did not approach the threshold of showing that the Judge was wrong in principle, adopted the incorrect approach or was wrong in principle. 
[18]	WDC’s appeal was misconceived from the outset and the financial consequences should not be visited on Mr Clay.  
Result
[19]	The appeal is dismissed. 
[20]	WDC must pay Mr Gauld indemnity costs calculated on a reasonable solicitor and client basis together with usual disbursements.

Solicitors: 
Heaney & Partners, Auckland for Appellant
Landley Law, Christchurch for Respondent