IN THE Court of appeal OF new Zealand

I TE KŌTI PĪRA O AOTEAROA	
 CA745/2017
 [2019] NZCA 148

	
BETWEEN	
MAC MOTORS LIMITED
Appellant	
	
AND	
BUTCH PET FOODS LIMITED
Respondent	

Hearing:	
2 April 2019	

Court:	
Gilbert, Wylie and Thomas JJ	

Counsel:	
M Wilkinson, Director of Appellant
P T Finnigan for Respondent	

Judgment:	
9 May 2019 at 3 pm	

JUDGMENT OF THE COURT

A	The appeal is dismissed.

B	Costs on the appeal are to lie where they fall.
____________________________________________________________________

REASONS OF THE COURT

(Given by Thomas J)
Introduction
[1]	In assessing the reasonableness of a successful party’s expert witness costs, should the Court take into account that the successful party was not represented by counsel?  This question of law was the basis of Brewer J’s decision to grant leave to appeal from his judgment, which had reduced a District Court award of disbursements to Mac Motors Limited (Mac Motors).  Mac Motors, represented principally by its director, Michael Wilkinson, had successfully defended a claim against it in the District Court where the respondent, Butch Pet Foods Limited (BPF), claimed Mac Motors had negligently repaired the gearbox or clutch assembly unit of a Hino truck.  
[2]	As Mr Wilkinson represented Mac Motors, any award against BPF was limited to disbursements.  In the District Court, Judge M E Sharp awarded $83,037 as against Mac Motor’s claim of $109,487.73, the bulk of which related to the costs of expert witnesses.  
[3]	BPF appealed the dismissal of its claim and the award of disbursements.  Again, Mac Motors was represented by Mr Wilkinson.  Brewer J dismissed BPF’s substantive appeal but reduced the disbursements award to $52,291.  Mac Motors then applied for leave to appeal.
[4]	Brewer J considered there is an argument that a self-represented party should be entitled to greater assistance from an expert witness than would otherwise be the case.  He concluded this was a matter of some general or public importance justifying a second appeal, given the increasing number of self-represented parties appearing before the courts.  For that reason, he granted leave on the question of law set out above.  
Background
[5]	Mac Motors is a company that carries out motor repairs.  BPF owned a Hino truck that suffered a mechanical failure after having travelled 293,193 km.  In November 2012, Mac Motors repaired the Hino truck.  The repairs included work to the clutch and gearbox.
[6]	In February 2013, the Hino truck was being driven on the Papakura-Clevedon Highway when there was a failure of either the gearbox or the clutch assembly unit.  Between the date of the repair and the date of breakdown, the Hino truck had travelled only a further 18,172 km.  
[7]	The issue before the District Court was the cause of the failure.  The claim was for $32,545.77.  Mac Motors denied liability on the basis BPF’s employees caused the failure through driver abuse.  
[8]	Mac Motors had engaged Dr Jonathan Smith, a metallurgist, of Optimech International Ltd and Mr Timothy Smithson, an engineer, of Assessco General & Marine as expert witnesses.  Judge Sharp preferred their evidence over that of BPF’s expert and concluded the failure likely resulted from driver abuse.
[9]	In the High Court, Brewer J identified the four factual issues for determination in the appeal and addressed each separately, undertaking a detailed analysis of the evidence.  He was satisfied Judge Sharp had identified the key areas of dispute and comprehensively explained why she preferred the expert evidence on behalf of Mac Motors.  The evidence did not persuade Brewer J that the Judge was wrong.  He referred to Judge Sharp’s finding that the science presented by Mac Motors’ experts was unassailable.
[10]	Brewer J, however, took a different view from the District Court on Mac Motors’ claim for disbursements in respect of its two expert witnesses, Dr Smith and Mr Smithson.  He concluded that the District Court was incorrect in the extent to which it allowed payment of experts for time they spent outside of giving evidence and reasonable preparation time.    
Application to adduce further evidence
[11]	Mac Motors applied for leave to adduce further evidence on appeal, namely affidavits from its two experts, Dr Smith and Mr Smithson.  BPF opposed the application.  The two affidavits address the witnesses’ respective expertise and otherwise are more in the nature of submission, seeking to justify their respective invoices.  We accept Mr Finnigan’s submission for BPF that the evidence is inadmissible, it being neither on questions of fact nor meeting the tests of freshness and cogency.  
In assessing the reasonableness of a successful party’s expert costs, should the Court take into account that the party was not represented by counsel?
[12]	Rule 14.12(2) of the District Court Rules 2014 provides:
14.12	Disbursements
…
(2) 	A disbursement may be included in the costs awarded for a proceeding 	to the extent that the disbursement is—
	(a) 	of a class that is—
		(i) 	approved by the court for the purposes of 					the proceeding; or
		(ii) 	specified in subclause (1)﻿(b); and
	(b) 	specific to the conduct of the proceeding; and
	(c) 	necessary for the conduct of the proceeding; and
	(d) 	reasonable in amount.
[13]	The rule is both the starting point and finishing point in any consideration of an award of disbursements in the District Court.
[14]	The correct approach to costs was recently addressed by the Supreme Court in McGuire v Secretary for Justice, where the Supreme Court allowed an appeal from a Court of Appeal decision that had taken a different approach to the settled law as to whether a litigant in person, who was also a lawyer, could recover costs.  Until the Court of Appeal judgment in Joint Action Funding Ltd v Eichelbaum, the recovery of costs by a litigant in person who was also a lawyer was considered an exception to the primary rule that a successful litigant in person was entitled to recover disbursements but not costs.  The Court of Appeal had considered that the lawyer in person exception was inconsistent with the costs regime in the High Court Rules 2016 (which closely mirrors the District Court Rules) and decided no award of costs could be made to a lawyer acting in person.  
[15]	William Young J, writing for the Supreme Court, described a change in the Rules as amounting to a policy decision that would be “towards the outer edge of the proper judicial function”.  He concluded:
[88] 	… if there is to be reform to the law as it stood before Joint Action Funding, this should be effected otherwise than by the courts.  This could be done by the legislature although we think that such reform is probably within the competence of the Rules Committee.  In either case, reform would occur only following appropriate consultation.  In the meantime, what we have described as the primary rule, the lawyer in person exception and the employed lawyer rule are to be applied. …
[16]	McGuire v Secretary for Justice was decided after Brewer J granted leave to appeal and posed the question of law the subject of this decision.  
[17]	The Supreme Court has now made it clear that any departure from the Rules (whether District Court or High Court) is not part of the proper judicial function.  If there is to be a change to provide that an assessment of disbursements should take into account that the successful party is a litigant in person, then that is a matter for the Legislature or probably, as the Supreme Court suggests, the Rules Committee, after appropriate consultation.
[18]	That, then, is our reasoning behind our answer “no” to the question posed by Brewer J.  That is not, however, the end of the matter.  Leave for a second appeal having been given, we must now consider Mac Motors’ appeal against the reduction in disbursements awarded to it in the usual way.  This requires us to begin with a brief review of Judge Sharp’s decision on disbursements and then to consider Brewer J’s approach on appeal.
District Court judgment on costs
[19]	Judge Sharp addressed r 14.12 of the District Court Rules, noting that for a disbursement to be recoverable, it must be of a class approved by the Court for the purposes of the proceeding; specific to the conduct of the proceeding; necessary for the conduct of the proceeding; and reasonable in amount.   She reminded herself of the Court of Appeal guidance on experts’ fees in the case of Air New Zealand Ltd v Commerce Commission:
[62]	A party can recover in respect of an expert witness only for the time he or she spends giving evidence and the time he or she spends in preparing that evidence.  In addition, a party could properly claim for time spent by its expert in critiquing other parties’ experts so as to assist counsel to understand the issues and opposing contentions and to assist counsel in cross‑examination.  But experts do not draft pleadings and do not write legal submissions.  Any claim for time spent on those tasks would not fall within the criteria in [r 14.12(2)].  …
[20]	Judge Sharp considered each invoice of the two experts. She disallowed Dr Smith’s first invoice as it did not meet the criteria of an approved class, specificity and necessity.
[21]	In respect of Dr Smith’s second invoice, she awarded $7,000 of the $10,401 claimed because the claim did not meet the criteria in r 14.12(2).  Although Dr Smith charged for three days in Court, he only testified for half a day.  The Judge accepted BPF’s objection that it was unreasonable to require it to pay for charges merely described as “court work”.  
[22]	In respect of Dr Smith’s third invoice, Judge Sharp made some minor amendments (including in respect of an interest charge of over $3,000) and allowed the sum of $35,550, as against the $40,357.32 claimed.
Mr Smithson
[23]	Of Mr Smithson’s eight invoices, Judge Sharp did not materially reduce the claim in respect of six of them.  One she disallowed entirely because it was an interest charge imposed on unpaid accounts.
[24]	Mr Smithson’s second invoice for $29,125.30 was reduced by the Judge to $19,862.  She disallowed the sum of $4,800 on the basis it appeared to be a reference to preparing pleadings or submissions.  She also disallowed $1,037.50 in respect of a peer review by a person who did not give evidence.  She disallowed certain disbursements claimed, for example a charge of seven hours for an overnight stay in Auckland.  She allowed $4,800 for time Mr Smithson spent in Court critiquing BPF’s evidence for Mac Motors.  
[25]	In her conclusion on the experts’ fees, the Judge said:
[18]	The successful defendant has persuaded the Court on the balance of probabilities that the sum of $83,037 is an allowable disbursement to be paid by the plaintiff.  Whilst the defendant’s experts’ time for Court attendances, reviewing and critiquing witnesses and preparing briefs of evidence is higher than usual in a civil proceeding, this is due to both the complexity of the issues involved and that the defendant was represented by its two lay directors.
[26]	This final comment demonstrates an error in approach, which warranted the reassessment carried out by Brewer J.  We now turn to consider Brewer J’s approach on appeal and his decision to reduce the award of expert fees from $83,037 to $52,291.
High Court judgment on costs
[27]	Brewer J referred to BPF’s submissions and its primary objection to the claim for Mac Motors’ experts’ entire time, particularly sitting in Court and at counsel’s table assisting the two directors.  BPF contended this was tantamount to claiming legal costs and outside the principles governing entitlement to disbursements for experts, which are limited to giving evidence and reasonable preparation time.  Brewer J noted that no submissions had been filed on behalf of Mac Motors.  Unfortunately, that was not correct.  Submissions had been filed but these had not been brought to Brewer J’s attention.  
[28]	The submissions on behalf of Mac Motors emphasised that Judge Sharp had already reduced the expert witness costs by $26,450.  Mr Wilkinson noted that Mac Motors is a small two-man operation and had suffered considerable stress and financial difficulties defending what he described as a “meritless and vindictive case”.
[29]	Brewer J did not interfere with the reductions Judge Sharp made to the experts’ fees.  There was no cross-appeal in respect of those reductions and they were undoubtedly correct.  
[30]	 In respect of experts’ fees, Brewer J’s view was:
[172]	An expert is engaged because they have specialist expertise in an area.  In preparing their report, an expert may reasonably seek some peer review to ensure their evidence is properly focused and within proper parameters.  An expert can also reasonably be used to peer review the reports of other experts in their field who will be called by their instructing party to give evidence.  The reviewing expert would need to be familiar with the other experts’ reports in any event.  However, because an expert is supposed to have the expertise to give evidence in his or her field, peer review should be a minor aspect of their preparation time.
[173]	As to time spent in Court, an expert witness is just that, a witness.  He or she is not a litigation advisor.  Generally, a party can charge for the time an expert called by them is in Court to give evidence.  Often, it is reasonable for an expert to be in Court to listen to the evidence of opposing experts and to assist the party calling them to prepare for cross-examination.  However, advice on cross-examination can be given from pre-trial perusal of reports, and any unexpected evidence can be referred to the expert via the transcript.  Therefore, it will not usually be reasonable for a party to charge for an expert being present in Court throughout the trial. 
Dr Smith
[31]	Brewer J reduced the award in respect of Dr Smith’s second invoice from $7,000 to $4,300.  The claim related mostly to Dr Smith’s attendance for three days in Court, during which time he gave evidence for half a day.  Brewer J concluded it would be reasonable to award costs in respect of Dr Smith’s time giving evidence and critiquing BPF’s expert witnesses.  
[32]	Brewer J reduced the sum awarded in respect of Dr Smith’s third invoice for two reasons.  First, in respect of a claimed payment for peer review on the basis that a party cannot charge for time spent by an expert contributing to a peer review by someone not involved in giving evidence.  This was undoubtedly correct.  He did allow the charge for time Dr Smith spent in discussions with Mr Smithson.  Secondly, Brewer J allowed 70 hours, as against the 111.5 hours charged for, in respect of a further appearance in Court and out-of-Court analysis.  He regarded the number of hours charged as unreasonable, given the nature and complexity of the issues.  
Mr Smithson
[33]	Brewer J said he would reduce Mr Smithson’s hourly rate from $300 to $240 on the basis the claimed hourly rate of $300 was excessive and unreasonable.  The adjustments to the invoices do not reflect that change, however.  In respect of the fourth invoice, where Judge Sharp had reduced the award to $6,250, Brewer J further reduced the award to $6,000 “given my reduction of Mr Smithson’s hourly rate”.  The reduction does not equate to a reduction in Mr Smithson’s hourly rate from $300 to $240.  The same comment applies to the small reductions made to invoices six, eight, nine and ten.
[34]	In respect of the fifth invoice, Mr Smithson charged for eight hours per day when he was in Court.  BPF’s challenge was on the basis Mac Motors was not entitled to recover for all those hours, which included Mr Smithson sitting in Court critiquing evidence.  Brewer J said:
[191]	I agree broadly with the Appellant’s submission.  The Respondent may recover for the time charged by Mr Smithson for giving evidence (plus reasonable waiting time).  Likewise, a reasonable charge may be made for time spent by Mr Smithson for assisting the Respondent to understand the evidence of the Appellant’s experts and so prepare cross-examination.  But, as I have said, much of that should be done pre-trial on the basis of the reports.  In some cases having an expert observe the trial for significant periods may be reasonable.  However, I have no submissions from the Respondent as to why Mr Smithson sat through the trial.
[192]	Mr Smithson gave evidence for one day over a three day period, which involved five-and-a-half hours.  I do not regard his claim for 64 hours for Court time and preparation as reasonable given the nature and complexity of the issues.  I will permit the Respondent to charge for a total of 32 hours (which includes eight hours for attendance at Court – including waiting time).  The fifth invoice is reduced to $13,178.
[35]	We are unable to reconcile the Judge’s decisions to allow 32 hours only and reduce the charge out rate with the resulting financial calculation of $13,178.  We address this further below.
[36]	Brewer J disallowed the $4,000 awarded in the District Court in respect of the seventh invoice as it was an advance for two future hearing dates.  As no final invoice was supplied for that future work, he disallowed the claim.
Were the disbursements claimed by Mac Motors for its experts’ fees reasonable?
[37]	There is no real dispute that the experts’ fees incurred by Mac Motors were of a class approved by the Court, specific and necessary for the conduct of the proceeding.
[38]	Brewer J undertook a careful analysis of the expert evidence, which was the basis for Judge Sharp’s dismissal of the claim, and he supported that decision.  In that context, he considered the disbursements.  Given Brewer J’s thorough approach to the evidence, he was well-placed to make an assessment of the reasonableness of the experts’ costs.  
[39]	Generally, we see no basis to interfere with Brewer J’s assessment in respect of the allowance he made for the time experts attended in Court.  In our view, his approach was correct.  That is, generally a party can recover the costs charged for the time its expert is in court giving evidence.  Often it will be reasonable for the expert to be in court to listen to the evidence of opposing experts and to assist in preparation for cross-examination.  In some cases, depending upon the nature of the case, it might be reasonable for an expert to be present for significant periods of the trial.
[40]	We have considered Brewer J’s decision to reduce Mr Smithson’s charge-out rate.  BPF had criticised the charge-out rates of both Mac Motors’ experts in the District Court but Judge Sharp neither addressed that submission nor made any alteration to the charge-out rates.  Brewer J accepted BPF’s submission that Mr Smithson’s hourly rate of $300 was excessive and unreasonable, noting Dr Smith, who was arguably more qualified, charged between $225 and $240 per hour.  On that basis, Brewer J said he would reduce Mr Smithson’s hourly rate to $240.    
[41]	The fact that Dr Smith has a lower hourly charge-out rate and is perhaps more qualified than Mr Smithson does not, of itself, mean that Mr Smithson’s hourly rate is unreasonable.  There was no dispute that Mr Smithson was an appropriately qualified expert.  In his report filed in the District Court, Mr Smithson detailed his extensive 47 years’ experience as an automotive machinist and engineer.  It does not appear that BPF proffered any evidence to support its submission that Mr Smithson’s charge-out rate was unreasonable, for example by an affidavit addressing charge-out rates for comparable experts.  In the absence of any such evidence, arguably Mr Smithson’s charge‑out rate should not have been reduced.  
[42]	However, as we have already observed, the reduced rate Brewer J said he had adopted was not reflected in the award in respect of each invoice.  His reductions in fact resulted in relatively minimal change.  Brewer J was clearly more focused on the reasonableness of the sum in fact awarded in respect of each invoice rather than its precise calculation.  
[43]	Our difficulties in reconciling Brewer J’s calculation in respect of Mr Smithson’s second invoice, where Judge Sharp had allowed $19,862 and Brewer J allowed $13,178, was in any event to Mac Motor’s advantage.  It seems that Brewer J did not fully carry through his stated intention to halve the hours awarded and reduce the charge out rate.  In our assessment the amount in fact awarded by Brewer J was reasonable in circumstances where expert evidence was critical to the case.  We are satisfied that, whether or not counsel was instructed, the person representing Mac Motors would have required substantial assistance in understanding and critiquing the expert evidence presented at trial.  The actual amount allowed by Brewer J was consistent with his reasoning.
[44]	Brewer J made an assessment of the expert fees to be awarded to Mac Motors after properly directing himself on the relevant considerations, in particular the extent to which a successful party is entitled to recover its expert witness costs.  The reductions he made to the disbursements awarded in the District Court were as a result of a correct application of the Rules.  We are not satisfied there was any material error and we see no basis to interfere with Brewer J’s conclusion. 
Result
[45]	For the reasons given, the appeal is dismissed.  
[46]	The answer to the question of law referred to us is that, in assessing the reasonableness of a successful party’s expert witness costs, the Court should not take into account that the successful party was not represented by counsel.
[47]	The High Court allowed leave to appeal on the basis the question of law had some general or public importance given the increasing number of self-represented parties appearing before the courts.  Given that context, we conclude it is appropriate that costs should lie where they fall, with the result each party must bear their own costs and disbursements associated with the appeal.

Solicitors: 
Romaniuk & Associates Law Office, Auckland for Respondent