Easton Agriculture Ltd v Manawatu-Wanganui Regional Council

JurisdictionNew Zealand
CourtHigh Court
JudgeThe Hon Justice KÓS
Judgment Date07 September 2011
Neutral Citation[2011] NZHC 1005
Docket NumberCIV-2008-454-31

[2011] NZHC 1005

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

Kos J

CIV-2008-454-31

Between
Easton Agriculture Limited
First Plaintiff

And

and
Eveleigh Farming Company Limited (In Receivership)
Second Plaintiff

And

Manawatu-Wanganui Regional Council
Defendant
Counsel:

J O Upton QC with M S Dobson for Plaintiffs D J Heaney SC with S H Macky for Defendant

Catchline: Costs decision relating to unsuccessful negligence claim taken by plaintiffs—proceedings related to a floodway stopbank which failed and resulted in flooding of plaintiffs croplands—High Court found respondent owed a duty of care to monitor and maintain floodway stopbanks which it had breached, but that failure of stopbank was caused by independent factors for which defendant not liable — whether defendant entitled to increased costs under r14.6 High Court Rules (increased costs) because plaintiffs failed to accept a pre-trial walk-away offer — whether costs payable by plaintiffs should be reduced under r14.7(d) (party had succeed overall but failed in relation to an issue) — what proportion of the defendant's witness fees should be paid by the plaintiffs — whether receiver of second plaintiff should be personally liable for costs.

The issues were: whether the Council was entitled to increased costs under r14.6(3)(b)(v) High Court Rules (“HCR”) (increased costs—failing, without reasonable justification, to accept an offer of settlement) because the plaintiffs failed to accept a pre-trial walk-away offer; whether the costs payable by plaintiffs should be reduced under r14.7 HCR (reduction in costs—although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs); what proportion of the defendant's witness fees should be paid by the plaintiffs; and whether receiver of second plaintiff should be personally liable for costs.

Held: This was not an appropriate case for increased costs. The Council had to establish that the failure to accept the settlement offer was unreasonable. The unreasonableness of a rejection had to be assessed at the time of rejection, and not just against the subsequent result. The Court was conventionally cautious in awarding increased costs where the successful party had made only a walk-away offer. Such offers effectively valued the opponent's claim, prospects of success and their own litigation risk at nil. It was rare where it would be unreasonable for a plaintiff to take a more optimistic view of their own prospects than zero percent. As the case stood, it could not be said that the plaintiffs’ prospects of success were nil. The plaintiffs had had a good case that the Council had acted negligently. The issue of causation had been complicated; the council's litigation risk had not been insignificant. It had not been unreasonable for the plaintiffs to have rejected the walk-away offer.

There should be no reduction in scale costs for the plaintiffs. It made no difference that the plaintiffs had succeeded on some essential steps in their negligence claim, as they had failed on the final step. There was nothing out of the ordinary about the conduct of either party which justified a variation of the usual rule that costs followed the event.

Witness expenses, including expert witness fees, were recoverable as a disbursement pursuant to r14.12 HCR (disbursements). Each of the Council's witnesses had made helpful contributions to the analysis of the technically difficult issue of causation. Even though the Council had been unsuccessful on two issues within the head of negligence, that evidence had still been specific to and necessary for the conduct of the proceedings. The evidence of the forensic accounting witness had been less helpful and a reduction would be made in respect of his fee.

The liability of the receiver here would be as a non-party. The fact that a company had entered receivership during the course of a proceeding did not mean that the receiver was substituted as the party liable for costs as the company continued to exist. An application on notice to the receiver had to be made, and the non-party was entitled to be heard.

The Council was entitled to scale costs on a category 2B basis. It was not entitled to increased costs on the basis the plaintiff's rejected the walk-away offer. It was entitled to witness and non-witness disbursements. Leave was given for the Council to apply formally for costs against the receiver.

JUDGMENT OF The Hon Justice KÓS

The Hon Justice KÓS

Introduction

[1]

Background

[5]

The February 2004 flood

[36]

Parties

[67]

Pleadings

[76]

Issues

[93]

Issue 1: Can the Council be liable other than in negligence?

[94]

Issue 2: Did the Council owe the plaintiffs a duty of care in its monitoring and maintenance of the stopbank?

[122]

Issue 3: Was the Council negligent?

[143]

Issue 4: Did the Council's negligence cause the plaintiffs’ loss?

[195]

Conclusion

[224]

Disposition

[225]

Introduction
1

A floodway stopbank fails. The floodway diverts part of a river's flow during flood conditions. Together the floodway and river can cope with a 1 in 100 year flood. But the flood that leads to the stopbank failure is greater still. A 1 in 110 year flood. The floodway is crossed by a highway bridge. The bridge cuts through the top of the stopbank on the southern side of the floodway. During the flood the water reaches and laps the bottom of the bridge. Yet the flood should still be able to be contained within the floodway stopbanks.

2

But the southern stopbank fails. First, just upstream of the bridge. Then, a few hours later, downstream of the bridge. Ultimately a gap of 40 metres opens up about the bridge. The exact cause of the failure is in dispute. Nearby croplands belonging to the plaintiffs are flooded. The stopbank is the responsibility of a regional council. Must the council compensate the plaintiffs for the loss of their crops?

3

The main questions in this case are whether the Council was negligent in its monitoring and maintenance of the stopbank, and whether any such negligence caused the plaintiffs’ loss. The plaintiffs expressly do not claim the construction of the bank or bridge was negligent.1 Any such claims would long since have been time barred.

4

Evidence as to quantum was received by the Court. By agreement the issue of quantum was reserved for further argument, if need be. This judgment is confined to whether the Council is liable to the plaintiffs.

Background
Manawatu River
5

The Manawatu River is about 160 kilometres long. It rises on the eastern side of the Ruahine Ranges. Fifty kilometres later it passes through the Manawatu

Gorge, and then flows on past the city of Palmerston North. From there to the small settlement of Opiki, the river is steep enough to transport gravel when the river is in flood, and the riverbed is gravelled. Downstream of Opiki the gradient is flat. The riverbed is silty. Flood velocities here are typically about 1.5 metres per second, compared to 3 to 4 metres per second in the steeper Palmerston North section.
6

River level and flow records have been held longer for the Manawatu than any other river in New Zealand. An automatic recorder has been operating at Palmerston North since 1929. Manual information is available back to the 19th century. The February 2004 flood, with which we are concerned, was the third largest flow recorded on the river:

Year

Discharge (cumecs) 2

1880

4000

1982

3800

2004

3500

7

At Opiki, where the river gradient flattens out, the Oroua River joins the Manawatu. The Oroua is the Manawatu's major tributary. Below the confluence with the Orua, at Opiki, the Manawatu wends its way on towards the sea past flat lands called the Makerua and Moutoa basins. The plaintiffs farm in the Moutoa basin.

8

Substantial swamp drainage works were undertaken in these areas in the 19th century. Flax was planted in the newly drained land. The flax fibre was used to make rope for sailing vessels and lashings for wool bales. Much of it was exported to Australia. Maori had exploited this resource for generations by the time pakeha settlers established ropewalks along the Manawatu river banks in the 1840s. 3 When the flax industry declined in the late 19th century the land was drained and converted to farming. First Makerua, and later Moutoa, the area with which we are concerned in this case.

Horowhenua County & Its People (Dunmore Press, Palmerston North, 1984) 141–145.

9

The first flood protection works were constructed between 1923 and 1925. The Makerua Drainage Board constructed stopbanks to protect the Makerua basin. In the 1930s and 1940s more stopbanks were built, by the Manawatu-Oroua River Board and the Palmerston North River Board.

Lower Manawatu Flood Control Scheme
10

The Lower Manawatu Flood Control Scheme (LMS) was undertaken by the Manawatu Catchment Board between 1959 and 1965. The LMS protects 320 square kilometres of land from flooding. But for these flood protection works, the city of Palmerston North, the town of Fielding, and significant areas of the region, in particular the Taonui, Makerua and Moutoa basins, would be prone to flooding in severe weather events.

11

The LMS relies primarily on stopbanks to contain floodwaters. A key part of the scheme, as we shall see, is the Moutoa floodway. The LMS is designed to contain a “1 in 100 year flood”, meaning that such a flood is expected (measured over a very long period of time) to recur on average once every 100 years. To put it another way, there is a 1 per cent statistical probability of that flood size being equalled or exceeded in any given year. The LMS stopbanks were built with a design objective of a freeboard of 450 millimetres. That is, at all points the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT