IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-2820 [2013] NZHC 2226

BETWEEN	EDWARD DAVID LANGSTON
Plaintiff	
AND	MOUNT HUTT HELICOPTERS LIMITED
Defendant	

Hearing:	29 August 2013 (On the papers)	
Counsel:	B M Russell for Plaintiff
H C Matthews for Defendant	
Judgment:	29 August 2013	

JUDGMENT (2) OF FOGARTY J

Introduction

[1]    The parties are unable to agree costs following the judgment of this Court on 17 May 2013. That judgment found that an obligation of the defendant to the plaintiff in a 2008 Deed was not extinguished by a clause in a later 2010 Deed, to which the plaintiff was not a party. The decision did not enter judgment in respect of the whole of the proceedings in favour of the plaintiff. If it had been decided in favour of the Defendant, it would have resolved the litigation. If not there would be other issues, not yet pleaded with particularity.

[2]       The judgment went on to award costs on a 2B basis to the plaintiff.

[3] The unsuccessful party, the defendant in the High Court proceedings, has appealed this decision.

LANGSTON v MOUNT HUTT HELICOPTERS LIMITED [2013] NZHC 2226 [29 August 2013]

[4] There are now two issues on costs. The defendant considers that the issue of costs should be postponed, to be resolved following the determination of its appeal. The plaintiff’s position is that no stay is in place, and the plaintiff seeks to have costs fixed, and paid.

Stay of any costs award

[5] The defendant submits that, as the matter is ongoing and the hearing was an affirmative defence, the decision should be categorised as interlocutory rather than a substantive resolution of the issues between the parties. Second, the defendant argues that because an appeal has been filed it is inappropriate for costs to be fixed, and for the defendant to be required to pay an order of costs prior to determination of the appeal.

[6] The defendant argues that the related earlier proceeding between Wilderness Aviation Limited, of which the plaintiff is the sole director, and Blair James Chapman, the director of the defendant, was stayed due to the failure of Wilderness Aviation Limited to pay $30,000 of the $45,000 agreed as security for costs. Accordingly, the defendant is concerned that the plaintiff will not be in a position to make repayment of any costs awarded in this proceeding (plus costs of the appeal) should the defendant’s appeal be successful.

[7]     For the resolution of stay or not, I do not think it matters whether the decision of the High Court is classified as resolution of an interlocutory matter or is a substantive decision. It has more the character of the latter, but, assuming in the defendant’s favour it should be treated as an interlocutory decision, the policy of the High Court Rules is that costs of interlocutory applications be fixed on determination of the application unless there are special reasons to justify otherwise.  See r 17.8.

[8] Had this decision not been appealed, but the litigation continued, the costs under this policy as to interlocutory decisions would have to be paid in any event. Why should costs be postponed because the matter has been taken on to the Court of Appeal?

[9] The only argument can be of the risk of non-recovery of costs paid should the decision be reversed. The plaintiff is seeking costs of $11,798.30. The defendant argues the total cost ought to be $3,084.50. Assuming at this point the higher level of costs, it seems to me that there has been no serious argument that a payment of costs in the order of $12,000 would be irrecoverable should the appeal be successful.

[10]   For these reasons, I reject the proposition that it is inappropriate for costs to be fixed now. Secondly, if they are, that there should be stay of any cost award.

Resolution of the costs dispute

[11] The successful plaintiff argues that the hearing was not  an  interlocutory hearing but rather a final hearing which determined the defendant’s affirmative defence, and accordingly seeks costs relying on Schedule 3, items 10, 11, 13, 30, 31, 33, 34 and 35. Essentially, it is seeking recovery for all costs in the litigation from the time of preparation of the first case management conference.

[12] By contrast, the defendant argues that if it is liable for costs it is only in respect of items 23, 24 and 26 in schedule 3, in words: for filing opposition to an interlocutory application, preparation of written submissions and appearance at the hearing.

[13] To resolve the competing approaches, it is necessary to examine more closely the nature of the issue that was resolved by the judgment. The plaintiff in these proceedings is seeking damages of approximately $372,000, being the value of unused helicopter hours, which the plaintiff alleged the defendant was obliged to provide to him personally. The plaintiff’s statement of claim was based upon a Deed of Settlement entered into in 2008.

[14] The statement of defence denied liability under the 2008 Deed without any particulars.  Materially, it denied only four paragraphs of the statement of claim:

14.	The defendant has repudiated the Deed of Settlement by not responding to any of the correspondence and thereby making it clear that it does not intend to perform its obligations under the Deed of Settlement and provide the plaintiff with any further flight time.
14.	
15.	The plaintiff was entitled to cancel the part of the Deed of Settlement with the defendant that created the obligation to provide the flight time.

16.	By letter dated 5 December 2012 the plaintiff has cancelled that part of the Deed of Settlement and is entitled to claim damages against the defendant.

17.	The plaintiff has suffered loss and damage as a result of the defendant’s repudiation of the Deed of Settlement in that the cost of helicopter use with another provider is estimated to be $372,000.

[15] In essence, it can be seen that the plaintiff is saying there is an obligation under the 2008 Deed to provide helicopter hours, that the defendant has repudiated that obligation, the plaintiff has cancelled and is now entitled to damages which it will quantify. The denial of these paragraphs are contained in time-honoured, but not to be admired, phrasing:  “It denies paragraph [  ] of the claim”.

[16] The statement of defence went on to plead an affirmative defence of a settlement, relying on the 2010 Deed. The affirmative defence argues that any obligation under the 2008 Deed was removed by clause 3.7 of the 2010 Deed, to which the plaintiff was not a party. The plaintiff was a signatory to the Deed, which was between the defendant and a limited liability company, Wilderness Aviation Limited, of which the plaintiff was a director and his family effectively owned the company.

[17]  The unparticularised denials of paragraphs 14 to 17 of the claim leave room for the defendant to argue other propositions. In these cost proceedings, the defendant argues that the rejection of the positive defence does not determine the entire proceedings, and that it had previously signalled to the plaintiff that if its affirmative defence was not successful that it would be pleading other defences including mistake, estoppel and rectification.

[18] There has been no challenge to the defendant’s submission that it had previously forecast other defences. The fact that there are other issues to follow is confirmed in a minute of a telephone conference held on 20 March 2013 by Associate Judge Osborne.

[19] Because of these issues, I do not think it is appropriate for the plaintiff to claim costs for case management conferences, so I reject claims for items 10, 11 and 13.

[20] Rather, I think the plaintiff is entitled to recover costs directly incurred in order to argue the affirmative defence point. These include the plaintiff’s affidavit of
1 May 2013, contribution to preparation of the agreed bundle of documents, preparation of submissions, and attendance at the hearing.

[21] The defendant essentially agrees that these attendances can be recovered, but differs by arguing that they should be recompensed by application of items 23, 24 and 26, rather than 30, 31 and 33 of Schedule 3. Further, that as it was the defendant who prepared the statement of facts in the common bundle, the plaintiff ought not be able to recover the time allocation for preparation of the bundle. In short, that the plaintiff’s costs should be limited to filing opposition to the “interlocutory application.”

[22] There is no record of there being an interlocutory application or a notice of opposition to the same. Rather, the minute of Associate Judge Osborne identifies that an agreement between counsel in the determination of the defendant’s affirmative defence will, if decided in favour of the defendant, determine the proceeding as a whole, and the matter was set down.

[23] Rule 14.5 provides that reasonable time for a step in litigation is the time specified for it in Schedule 3, or at a time determined by analogy “if Schedule 3 does not apply”, or “the time likely to be required for the particular step if no analogy can usefully be made.”

[24] It belittles and mischaracterises the positive defence resolved by the High Court as a mere interlocutory step. It was well understood that should the defendant win the point that was the end of the litigation.

[25] In such circumstances the duty of counsel to the plaintiff was to prepare on the basis that the ruling could be definitive. The fact that it may well be definitive, notwithstanding notice of other defences, is illustrated by the intention of the unsuccessful party to pursue its appeal on this “interlocutory point” prior to litigating other defences it says it has, but has not yet taken the opportunity to plead.

[26]   This case proceeded on the pleadings in the statements of claim, statements of defence and reply to its statement of defence. There was one affidavit of the plaintiff, parts of which were allowed to be read at the hearing. Although the agreed bundle of documents was prepared in the usual way one would expect, the question of the content of the agreed bundle would be a collaborative exercise, at the very least by cross-checking on the part of the plaintiff.

[27] Schedule 3 has the noble goal of trying to achieve certainty, but r 14.5 reveals that the ultimate goal is a just order of costs. The defendant’s argument that costs should be awarded in the order of $3,000 produces a sum which this Court recognises immediately is way below the underlying principle in Part 14 of the High Court Rules, that the rules contain rates and steps designed to deliver to the successful party approximately two-thirds of the daily rate considered reasonable. Here rate 2, $1990.00. On the defendant’s calculations, a reasonable practitioner acting for the plaintiff, preparing and arguing the affirmative defence point, would spend one and a half days including the hearing (which took about half a day). Equally, the plaintiff’s assessment that it would take such a practitioner four and one- third days is too high. A quarter of a day of that is for hearing for second counsel. I think the defendant is right, that second counsel was not required in this case. I was pleased to have Ms Mills appearing with Mr Russell, but it is another question as to whether or not the plaintiff is entitled to costs in that regard.

[28] By analogy to Schedule 3, I think it is reasonable to allow the plaintiff one day for preparation of the affidavit of the plaintiff (item 30), and half a day for engagement in contributing to settling the common bundle (item 31), a day for preparation for the hearing (item 33), and half a day for appearing at the hearing (item 34), a total of three days. At a category 2 rate this recovers the sum of $5,970.

On top of that there is the undisputed setting down fee of $3,141.80.  The defendant is ordered to pay costs in the total sum of $9,111.80.

Solicitors:
Lane Neave, Christchurch
White Fox & Jones, Christchurch