Perkins v Purea HC Auckland CIV 2007-404-00375

[2008] NZHC 2658

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-00375

BETWEEN  ALAN STANLEY PERKINS AND ADRIENNE ROSEMARY PERKINS Plaintiffs

ANDTERE MOANA PUREA Defendant

ANDTOM TANGI-TUAKE AND JUNE TANGI-TUAKE

Third Parties

Hearing:         On the papers

Appearances: NW Woods for Plaintiffs

D Smith and A Halloran for Defendant
PJ Stevenson for Third Parties

Judgment:      29 October 2008 at 11:00 am

JUDGMENT OF ASHER J [COSTS]

This judgment was delivered by me on 29 October 2008 at 11.00 a.m. pursuant to Rule 540(4) of the High Court Rules

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Registrar/Deputy Registrar

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Date

Solicitors:

N Woods, Rice Craig, PO Box 72 440 Papakura

Frost & Sutcliffe, Solicitors, PO Box 23570 Auckland
G Aislabie, Newmarket Law, PO Box 99633 Auckland

Copies:

D Smith, Barrister, PO Box 3799 Auckland

PJ Stevenson, Barrister, PO Box 3247 Auckland

PERKINS AND  PERKINS V PUREA HC AK CIV 2007-404-00375  29 October 2008

[1]      In a judgment delivered on 3 June 2008 the application by the plaintiffs, Mr and Mrs Perkins as purchasers, for an order for specific performance of a contract for sale and purchase of the property at 131 Rowandale Avenue, Manurewa (“the property”) was refused.  A declaration was made that the property was held by the vendor defendant, Mr Tere Purea on trust for the third party, his daughter, Mrs June Tangi-Tuake.   Mrs Tangi-Tuake succeeded in the proceedings.   A damages order was made in favour of the Perkins, against Mr Purea.  Although the Perkins obtained judgment against Mr Purea, they failed in their primary goal of obtaining specific performance.

[2]      I reserved leave to the parties to make submissions in relation to costs and as to  whether  I should  make  an  additional  order  in  favour  of  the  Perkins  against Mr Purea in relation to the loss of a deposit of $11,000.   I have now received submissions from all parties.  The Perkins and Mr Purea agree that costs should be awarded on a 2B basis, together with disbursements of $10,290.  They both agree that I should make a damages award of $11,000 in favour of the Perkins against Mr Purea.   In the submissions that I have received the Perkins do not seek costs against Mr Purea.

[3]      The  successful  third  party,  Mrs Tangi-Tuake,  seeks  full  indemnity  costs against Mr Purea, relying on certain Calderbank offers that were allegedly made. That request is opposed on behalf of Mr Purea.

An additional award of damages

[4]      Given the agreement between the Perkins and Mr Purea that there should be an additional award of damages against the defendant in respect of the deposit of

$11,000, there is no difficulty in making an order in this regard.   I have already signalled in my substantive judgment that I considered such an order appropriate.

Costs

Approach

[5]      In  seeking  indemnity  costs  against  Mr Purea,  Mrs Tangi-Tuake  relies  on r 48C of the High Court Rules, which gives the Court a discretion to order a party to pay increased costs.  In particular it is provided at r 48C(3)(b)(v) that:

48C     Increased costs and indemnity costs:

…

(3)       The Court may order a party to pay increased costs if— …

(b)The party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in the proceeding by—

(v)       Failing, without reasonable justification, to accept an offer of settlement whether in the form of  an offer under rule 48G … or some other offer to settle or dispose of the proceeding; or

Rule 48G(1) relevantly provides:

48G     Written offers without prejudice except as to costs

(1)A party to a proceeding may at any time make to any other party to the proceeding a written offer that—

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

and

(b)      relates to an issue in the proceeding.

[6]      Rule 48G in itself merely documents the availability of settlement offers known as Calderbank letters and their recognition in the Rules.  It does not set out any criteria on which such written offers can be assessed in a costs context.  It was stated in Moore v McNabb (2005) 18 PRNZ 127 at [58] in relation to Calderbank letters:

In summary, it is a requirement of fairness that litigants — particularly defendants — have some economic means of limiting their exposure to the risk of costs; and secondly the Court itself must ensure that a procedure of this character operates as an effective encouragement to settle.

[7]      It must be borne in mind that, as was pointed out in the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd (2005) PRNZ 897 at [45], all the grounds for giving increased costs, including that relating to Calderbank letters, depend on a finding  in  terms  of  r 48C(3)(b)  that  “the  party  opposing  costs  has  contributed unreasonably to the time or expense of the proceeding or step in the proceeding”. Further, r 48C(3)(b)(v) puts the focus on the conduct of the recipient of the offer by providing that the failure to accept the offer must be “without reasonable justification”.

Decision

[8]      With  this  in  mind  I  turn  to  the  facts  relied  on  by  Mrs Tangi-Tuake. Ms Stevenson on her behalf points to three Calderbank offers made to the defendant. These  offers  were  made  in  letters  dated  14 May 2007,  11 October 2007  and

14 April 2008, the last letter being sent seven days before the trial.

[9]      The first two letters offered a settlement with Mr Purea on the basis of a payment by the Tangi-Tuakes, the first offer being a payment of $20,000 and the second offer being a payment of $110,000.   The first letter did not mention the Perkins.  However, they were referred to in the second and third letters.  These letters implicitly required Mr Purea to reach a settlement with the Perkins.  They required Mr and Mrs Perkins to discontinue their claim for specific performance in the High Court, presumably in return for a payment to them of all or part of the settlement sum by Mr Purea.

[10]     A Court will be cautious in allowing increased costs on the basis of a refusal to accept a Calderbank offer which would require complete capitulation.   This is because such a letter provides little incentive to the receiving party.   In this case, however, the letters did provide an incentive to Mr Purea to settle by an offer to pay a substantial sum of money, albeit in return for his abandonment  of his claim to the property.

[11]     Even so, a Court must be cautious before ordering increased costs in a case such as this.  The offer by Mrs Tangi-Tuake left it to Mr Purea to reach a settlement

with the Perkins.  This meant that there were complications in Mr Purea accepting an offer.  He had to also effect a settlement with the Perkins.  This would have been difficult, perhaps impossible, given the amount of money offered.  I do not have any evidence on the point, but I am prepared to assume that Mr Purea would have had difficulty in getting the Perkins to accept a settlement given that the Perkins, who were not involved in the dealings between Mr Purea and Mrs Tangi-Tuake, had no ability to assess precisely the strengths and weaknesses of the different accounts given by both parties as to the relevant events.   They simply wanted specific performance of their apparently enforceable agreement with Mr Purea.

[12]     I consider it also relevant that the fullest and most detailed offer made, which included precise proposals for the first time in relation to the steps to be taken by the Perkins, was only made approximately seven days before the start of the hearing.

[13]     I have found that Mr Purea wrongly denied Ms Tangi-Tuake’s interest in the property, and in the course of doing so I rejected a good deal of his evidence. However, as the unsuccessful party he pays the price for this by the standard order for costs.  I do not consider that in the particular circumstances of this case it could be said that he contributed unnecessarily to the time or expense of the proceeding or a step in the proceeding, by his failure to accept the Calderbank offers.   I do not consider   that   his   position   evinces   the   unreasonableness   required   to   satisfy r 48C(3)(b).

[14]     In the circumstances, I am not satisfied that an order in excess of the scale should be made.

Result

[15]     An order is made directing that in addition to paying the damages already set out in the judgment of 3 June 2008, the defendant is to pay the plaintiffs a sum for damages of $11,000.

[16]     The defendant is to pay the costs of Mrs Tangi-Tuake on a 2B scale.

[17]     Given that the original District Court summary judgment proceedings issued by  Mr Purea  and  the  High  Court  proceedings  issued  by  the  Perkins  were consolidated, I order that costs at the 2B scale be paid by the defendant in respect of the  attendances  in  both  sets  of  proceedings.    The  defendant  is  also  to  pay the reasonable disbursements of Mrs Tangi-Tuake in both proceedings.

[18]     Mr and Mrs Perkins have not sought any costs against Mr Purea.   I do not know what the position is between them, and I therefore reserve the question of costs between them should the parties later wish to seek an order.   I have received no submissions on whether the third parties are entitled to costs against the plaintiffs, and I also reserve that question.

[19]     Hopefully,  the  order  that  has  been  made  will  enable  the  parties  now  to resolve any other issues relating to costs that may arise.   Nevertheless, they have leave to apply to the Court in respect of any outstanding costs issues.

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Asher J