IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2019-404-794
[2020] NZHC 1298	

BETWEEN	SUMMIT BUILDING SERVICES
Appellant	
AND	VICKI JILL BAXTER AND LANCE OWEN BAXTER
Respondents	

Hearing:	On the papers	
Appearances:	M G Keall for Appellant Respondents in person	
Judgment:	11 June 2020	

JUDGMENT (No 2) OF PAUL DAVISON J
[Re Application for recall of orders for Costs]

This judgment was delivered by me on 11 June 2020 at 1:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:
Fryers Joyce, Auckland

SUMMIT BUILDING SERVICES v BAXTER [2020] NZHC 1298 [11 June 2020]

Introduction

[1]	On 12 February 2020 I delivered my judgment in this matter.1 Summit Building Services Limited (the appellant) was found to have owned the copyright subsisting in the house plans, and the respondents were found to have infringed that copyright. The appeal was allowed, and judgment entered for the appellant against the respondents for $5,500 (being the amount equivalent to what was deemed a notional royalty fee for the use of the plans).2 The appellant was also found to be entitled to costs on a 2B basis with disbursements.

[2]	The judgment directed that in the event the parties were unable to agree on costs, the appellant was to file and serve a costs memorandum within ten working days of the date of delivery of the judgment. The respondents were directed to file and serve their costs memorandum within seven working days following their receipt of the appellant’s costs memorandum.

[3]	On 19 February 2020, the respondents filed a brief “memorandum querying re-issuance of judgement” [sic], to which they attached documents which they said prove that on 14 November 2012 they had paid the appellant $1,500.00 for the preparation of a scheme plan for the home. Although not stated as such, it appears that on the grounds that they had already paid $1,500.00 for the preparation of a scheme plan, the respondents were seeking an order for recall of the judgment. However, the respondent made no submissions on the issue of costs.

[4]	By memorandum dated 11 March 2020 the appellant replied to and opposed the respondents’ application for recall of the judgment. In this memorandum the appellant set out its claim for costs on a 2B basis and also detailed its claimed disbursements. The appellant claimed costs totalling $17,447.00 and disbursements totalling $1,013.98. The appellant also sought a direction by the Court that the security for costs lodged by the appellant in the sum of $1,115.00 be repaid to the appellant. The appellant also sought an order quashing the order for costs in favour of the respondents made by the District Court.

1	Summit Building Services v Baxter [2020] NZHC 143.
2	At [62].

[5]	The respondents did not file a memorandum in response to the appellant’s claim for costs and disbursements.

[6]	In my Minute dated 16 April 2020, I declined the respondents’ application for recall of my judgment. I also confirmed the appellant was entitled to an award of costs on a 2B basis together with disbursements, and with one exception relating to the time claimed for the preparation of written submissions, I allowed the appellant’s claim for costs of $13,863.00 and disbursements of $1013.98. I also made an order quashing the costs order made by the District Court, and directed the parties to file memoranda with the District Court in the event they were unable to agree on those costs.

The respondents’ second recall application

[7]	By memorandum entitled “Memorandum Reviewing Costs and Disbursements” filed on 20 April 2020, the respondents now seek an order for recall of my Minute of 16 April allowing the appellant’s claim for costs and disbursements, on the grounds that the costs were determined and ordered without the respondents being given an opportunity to be heard on the costs issue.

[8]	The respondents submit that the Court should recall the order for costs and disbursements made in the Minute of 16 April 2020, and substitute an order directing that the costs on the appeal together with the costs in the District Court, should lie where they fall.

[9]	The respondents say that on 15 February 2017, some 21 months prior to the District Court hearing, their counsel made a without prejudice offer of settlement of
$5000.00 in a letter sent to the appellant’s counsel. The letter stated that the offer was made on a “without prejudice as to costs” basis and advised that the respondents would be seeking indemnity costs for all further steps taken in the proceedings in the event that the offer was not accepted. The settlement proposed that upon payment of the settlement sum of $5,000.00 the appellant would discontinue the proceedings against the respondents, and the legal costs already incurred would lie where they fell. The letter stated that the offer was open for seven days from the date of the letter. The letter further stated that the appellant’s claims had “no prospect of succeeding” and were

“unmeritorious and bound to fail”. The copyright claim was said to be “entirely speculative”.

[10]	Although counsel for the appellant acknowledged receipt of the letter containing the settlement offer, the respondents say that the appellant did not respond to the offer.

[11]	The respondents note that their settlement offer was only $500.00 less than the amount of the judgment obtained by the appellant following its successful appeal.

Submissions

The Respondents’ submissions

[12]	The respondents submit that their “Calderbank” offer3 ought to have been taken into account in the costs determination because they made their settlement offer at a relatively early stage of the proceedings proposing settlement by payment of a sum only $500.00 less than the amount ultimately awarded to the appellant on the appeal.

[13]	The respondents refer to rr 14.10 and 14.11 of the High Court Rules 2016, and specifically r 14.11(4) which provides:

14.10	Written offers without prejudice except as to costs

(1)	A party to a proceeding may make a written offer to another party at any time that ––

(a)	is expressly stated to be without prejudice except as to costs; and

(b)	relates to an issue in the proceeding.

(2)	The fact that an offer has been made must not be communicated to the court until the question of costs is to be decided.

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	Calderbank v Calderbank [1975] 3 All ER 333 (EWCA).

(2)	Subclauses (3) and (4) ––

(a)	are subject to subclause (1): and

(b)	do not limit rule 14.6 or 14.7; and

(c)	apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).

(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.

[14]	The respondents submit that the Court’s discretion should be exercised consistently with the observations of this Court in Water Guard NZ Ltd v Midgen Enterprises Ltd in which Asher J said:4
[17]	A Calderbank offer can lead to cost consequences when it is vindicated by the quantum of damages or the orders made. It is a factor to be taken into account in determining whether a party from whom costs are sought has acted reasonably, or has otherwise behaved in a way which requires increased or indemnity costs…

[18]	…To have an effect on costs, a Calderbank offer generally needs to contain an offer that involves an element of genuine compromise…

[19]	…indicating good faith on the [offerer’s] part and a wish to find a commercially realistic settlement…

[20]	The reasonably early offer of the defendants and the lack of response favours a cost award for the defendants against the plaintiff.

[15]	The respondents conclude by submitting that costs ought to lie where they fall because they made a commercially realistic offer reasonably early in the proceedings, which was close to the value or benefit of the judgment ultimately obtained.

4	Water Guard NZ Ltd v Midgen Enterprises Ltd [2016] NZHC 1546 (citations omitted).

The appellant’s submissions

[16]	In its memorandum in response to the respondents’ application for recall of the order for costs, the appellant notes that the existence of the Calderbank letter appears to have been initially overlooked by both parties, as the respondents did not bring its existence to the attention of the Court until after the costs ruling was made in the 16 April 2020 Minute. The appellant’s counsel says that the appellant had similarly overlooked the existence of the Calderbank letter until reminded by the contents of the respondents’ memorandum of 20 April 2020.

[17]	The appellant submits that the respondents’ Calderbank letter contained a settlement offer in relation to the District Court proceedings and that it is not relevant to the issue of costs awarded to the appellant in relation to the appeal. However, in the alternative the appellant submits that if the Calderbank letter is found to be relevant to the appeal costs, then the terms of the $5,000.00 offer were not close to the value or benefit of the judgment it ultimately obtained on appeal.

[18]	The appellant submits that the respondents’ settlement offer must be assessed having regard to all of its terms and not just the sum of money to be paid. It submits:

(a)	The appellant’s success on appeal, while relatively modest in terms of quantum was a substantive reversal of the outcome in the District Court, and represented a vindication of the appellant’s position that it possessed copyright in its house plans and that its copyright had been infringed. The appellant notes that the Calderbank letter included a denial of liability, and alleged that the appellant’s copyright claim was unmeritorious.

(b)	While the sum of $5,000.00 offered in settlement was only ten per cent less than the damages awarded on appeal, it made no allowance for the significant legal costs which had been incurred by the appellant at that stage of the proceedings. The appellant notes that the costs claimable by the appellant up to that point of the proceeding, calculated on a 2B basis under the District Court scale exceeded $11,000.00. The appellant says that nearly all the pre-trial steps, including discovery, had already

been completed at the time the respondents’ offer was made and having regard to the costs incurred and the denial of a beach of copyright, the settlement offer was not commercially realistic.

[19]	The appellant further notes that the District Court proceedings were commenced towards the end of June 2015, and the parties thereafter completed discovery and had already attended a judicial settlement conference by the end of May 2016. The settlement offer was not made until February 2017, and the District Court trial took place in November 2018. Accordingly the settlement letter was sent 21 months prior to the District Court trial, but well after the completion of all pre-trial steps with the exception of the enforcement of some discovery orders.

[20]	The appellant submits that, when viewed in the context of that timeline, it is clear that the settlement offer was not made reasonably early in the course of the proceeding. Further, that, because the amount of the offer failed to compensate the appellant for its legal costs or acknowledge its ownership of copyright or breach, the offer did not represent a genuine compromise.

[21]	The appellant says that the offer was not ignored, as is evident by the acknowledgment of its receipt by the appellant’s counsel. While the offer was not otherwise formally responded to, the appellant says that rejection of the offer could be readily inferred by the subsequent communications between counsel for the parties later the same day, and by the absence of acceptance of the offer within the seven day period stipulated in the letter containing the settlement offer.

[22]	The appellant also submits that its conduct is distinguishable from that of the plaintiff in Water Guard, which refused several Calderbank offers made prior to the main hearing and made their own offer long after the case had been heard.5

5	Water Guard, above n 3, at [13] and [16].

Discussion

[23]	As Palmer J restated in Erwood v Holmes (No 2),6 a judgment may be recalled, under r 11.0 of the High Court Rules 2016, if:7

(a)	there has, since the hearing, been amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority issued;

(b)	the Court’s attention has not been directed to a legislative provision or authoritative decision of plain relevance; or

(c)	justice requires the judgment to be recalled for some other very special reason.

[24]	There is no question that neither (a) nor (b) apply here. The only possible basis for recalling the order for costs is if there exists some other “very special reason” to do so.

[25]	The respondents did not bring the existence of their Calderbank offer to the Court’s attention until 20 April 2020 after the order for costs had been made and notwithstanding the Court’s direction in the Judgment delivered on 12 February 2020 regarding the parties filing costs memoranda. In the case of the respondents they were directed to file and serve their costs memorandum within seven working days following their receipt of the appellant’s costs memorandum. The appellant filed its costs memorandum on 11 March 2020 meaning that the respondents’ costs memorandum was required to be filed on or before 20 March 2020.

[26]	The respondents’ failure to comply with the timetable for the filing of their costs memorandum and their late introduction of the issues relating to the Calderbank offer has nevertheless required the Court to reconsider the matter of costs and determine whether the Calderbank offer and any relevance it has to the determination of costs on the appeal, amounts to a ‘very special reason” for requiring recall of the costs order I made in the Minute of 16 April 2020.

6	Erwood v Holmes (No 2) [2020] NZHC 53
7	At [2], citing Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC).

[27]	I do not accept the appellant’s submission that consideration of the Calderbank letter is restricted to the District Court proceedings. The settlement offer was made for the purpose of resolving the dispute between the parties over the appellant’s claim that the respondents had breached its copyright, and that dispute continued to be litigated between the parties by means of the appeal. I therefore find that the Calderbank letter and its terms are relevant to the determination of the appeal costs.

[28]	However, in my view the settlement offer did not present a commercially realistic compromise of the appellant’s claims. While close to the amount of damages awarded by this Court, the offer did not account for or compensate the appellant for the significant legal costs it had already incurred prior to the offer being made, and did not include any acknowledgement that the respondent had breached the appellant’s copyright interest in the house plans.

[29]	Here the appellant was awarded damages which were assessed in terms of a notional license fee.8 In Bluestar Print Group (NZ) Ltd v Mitchell, the Court observed that “an offer to pay compensation at a level that is reasonable might well be regarded as conveying a distinct element of vindication to the plaintiff”.9 The Court also noted that “the relevance of reputational factors means that cost assessments are not confined solely to economic considerations.” In Henderson v Walker, Thomas J commented as regards the application of Blue Star:10
Regardless of whether Mr Henderson’s claim was properly characterised as a monetary claim, it was certainly in large part about the vindication of wrongdoing by Mr Walker. In fact, in relation to privacy, the remedy achieved by Mr Henderson consisted solely of a declaration. In that respect, this case is distinguishable from Bluestar…, where, although the plaintiff said she wished to achieve vindication, it appears from the Court of Appeal’s judgment she had only claimed for damages. In those circumstances, the Court’s remark that monetary compensation could be regarded as conveying an element of vindication makes sense. However, where a declaration of wrongdoing is sought as a remedy, it is fair for a plaintiff to insist on an acknowledgement of the same as part of any settlement.

[30]	The determination of costs is within the discretion of the Court.11

8	Summit, above n 1, at [55] and [57].
9	Bluestar Print Group (NZ) Ltd v Mitchell [2010] NZCA 385 at [19].
10	Henderson v Walker [2019] NZHC 3020 at [17].
11	High Court Rules 2016, rr 14.1 and 14.11(1).

[31]	In this case, an important purpose of the appellant’s claim was to establish that it owned the copyright interest in its house plans, and that the respondents’ actions amounted to a breach of the copyright. The judgment it obtained on the appeal included not only compensatory relief, but also a finding that it was the owner of copyright in the house plans which were the subject of the proceedings. The settlement offer was made on the basis that the appellant’s copyright interest was denied as was any copying of its plans. The reasonableness of the settlement offer needs to be assessed against those wider considerations including the issue of the appellant’s legal costs already incurred, and a vindication of the appellant’s claim of copyright in the house plans. In my view the respondents’ offer was not on terms which would have clearly been more beneficial to the appellant had it been accepted than the judgment subsequently obtained against the respondents, to warrant the Court making an adjustment or any reduction of the costs awarded to the appellant as the successful party.

[32]	Accordingly, I find that the Calderbank offer contained in the 15 February 2017 letter does not warrant the Court making any adjustment of costs. Further, that the respondents have failed to establish any special reason that in the interests of justice the costs order should be recalled.

Result

[33]	The application for recall of the award of costs, as ordered in my Minute of 16 April 2020, is dismissed. I confirm and allow the appellant’s claim for costs of
$13,863.00 and disbursements of $1,013.98.

[34]	I also make an order quashing the costs order made by the District Court, and direct the parties to file memoranda with the District Court for determination of the costs in connection with the proceedings in that Court, in the event that they are unable to agree on costs in the District Court.

[35]	I make an order that the costs of the parties in relation to this application and the previous application for recall of the judgment, are to lie where they fall.

Paul Davison J