AC/JV Holdings Ltd v General Construction Group Ltd
[2023] NZHC 2944
•20 October 2023
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2023-412-000079
[2023] NZHC 2944
BETWEEN AC/JV HOLDINGS LTD
Plaintiff
AND
GENERAL CONSTRUCTION GROUP LTD
First Respondent
PETER BERNARD DEGERHOLM
Second Respondent
Hearing: (On the papers) Counsel:
R J Hollyman KC and A J Peat for the Applicant
A S Olney and H M Mander for the First Respondent No appearance for the Second Respondent
Judgment:
20 October 2023
JUDGMENT OF CHURCHMAN J
[Costs]
Introduction
[1] The applicant, AC/JV Holdings Ltd (AC/JV), and the first respondent, General Construction Group Ltd (GCG), were parties to an NZS 3915 construction contract dated 29 October 2020 concerning the construction of an accommodation block. GCG completed its construction work in February 2021 and left the site at that time. Since May 2021, AC/JV has been using the accommodation block as intended. However, on 31 July 2023, GCG purported to bring an expert determination with the second respondent, Mr Degerholm, in relation to disputes over payments said to be outstanding on the contract.
AC/JV HOLDINGS LTD v GENERAL CONSTRUCTION GROUP LTD & ANOR [2023] NZHC 2944
[20 October 2023]
[2] Correspondence followed between the parties. On 9 August 2023, AC/JV’s solicitors wrote to GCG’s solicitors, stating that an expert determination was inappropriate in the circumstances. GCG’s solicitors replied on 10 August 2023, advising that GCG would be proceeding with its expert determination process, regardless of whether AC/JV chose to participate. On 11 August 2023, AC/JV’s solicitors wrote again to GCG’s solicitors, inviting them to agree to suspend the proposed expert determination, pending the determination by the Court of an application to injunct that process. They advised that in the absence of agreement, they would apply to the High Court for urgent relief. No agreement was forthcoming and AC/JV filed an application without notice for an injunction on 14 August 2023.
[3] The matter was heard on 15 August 2023. Counsel for the applicant and first respondent appeared by VMR. On 16 August 2023, I issued a decision allowing AC/JV’s application for an interim injunction to restrain GCG from proceeding with its proposed expert determination.1
[4] Having been successful in its application, AC/JV now seeks an award of costs against GCG. It seeks scale costs on a 2B basis, with a 50 per cent uplift, on the basis that GCG forced AC/JV to make the application when it otherwise would have been avoided. It also seeks costs on the costs application, stating it has endeavoured to agree costs with GCG, to no avail. Scale costs on a 2B basis amount to $9,440.50, and the total costs with uplift sought amount to $14,160.75 (plus disbursements).
[5] GCG opposes the application for costs. It says costs are not available, as the application was not opposed. Alternatively, it submits costs on the application be in the cause. GCG submits if the Court is minded to award costs against it, no uplift is warranted, since it did not oppose the application and AC/JV intended to apply for an injunction notwithstanding whether GCG agreed to suspend the expert determination.
1 AC/JV Holdings Ltd v General Construction Group Ltd [2023] NZHC 2212.
Discussion
[6] Costs are at the discretion of the Court.2 The overall objective is to achieve the outcome that best meets the interests of justice. The High Court Rules 2016 apply to the calculation of costs and set out the principles according to which the discretion must be exercised.
[7] GCG submits that costs on the application be in the cause. However, r 14.8 provides that costs on an interlocutory application should not be deferred. They are to be fixed when the application is determined and become payable once fixed.3 I see no reason to depart from that principle here.
[8] Costs will typically be awarded to the successful party.4 AC/JV says that as the successful party in this proceeding, it is entitled to costs. It has calculated costs of
$9,441 on a 2B basis, in addition to $478.26 in disbursements.
[9] GCG primarily opposes the application for costs on the basis that the application was not opposed. It says the application was made and determined without notice and that it was represented at the ex parte hearing of the application on a Pickwick basis only. It says no opposition to the application was filed or advanced and therefore the principle that costs should be fixed and become payable is not engaged, as the rule applies only to opposed interlocutory applications.
[10] In support of this argument, GCG relies on Commerce Commission v Viagogo.5 In that case, the Court of Appeal commented that counsel for the respondent appeared on a Pickwick basis and without prejudice to Viagogo’s objection to New Zealand jurisdiction. The Court commented that in those circumstances the applicant did not seek costs on its interim injunction application.6
2 High Court Rules 2016, r 14.1(1).
3 Rule 14.8.
4 Rule 14.2(1)(a); and see Weaver v Auckland Council (2017) 24 PRNZ 379 (CA).
5 Commerce Commission v Viagogo [2019] NZCA 472.
6 At [103].
[11] GCG says its only response to the application was to appear through counsel on a Pickwick basis, and as such it was appropriate that no costs order be made against it.
[12] However, it cannot be said that GCG did not oppose the application. Two counsel appeared on behalf of GCG in opposition to the application, and made submissions in opposition. The Viagogo decision is plainly distinguishable from the present case. In that case the respondent was an overseas entity which protested the jurisdiction of New Zealand courts to determine the matter, and questions of service were also in play. I do not consider the comment of the Court of Appeal to be binding on the present matter, nor a comment of established general principle, particularly given that it was obiter.
[13] The fact that the application was served on a without notice basis was a necessary consequence of the actions of the respondent in continuing to pursue the expert determination in circumstances where it arguably should not have, a point I now turn to consider.
[14] AC/JV says GCG should not have pursued the purported expert determination and put AC/JV to the cost of bringing the injunction application. AC/JV says the legal position was always clear and that this was brought to GCG’s attention. In particular, AC/JV says the legal position is set out in Rooney Earthmoving Ltd v Infinity Farms Ltd and this was repeatedly set out in correspondence to GCG preceding the filing of the application.7
[15] This is clearly correct. It is apparent from all the evidence before me, in particular from the emails and letters sent by its lawyers to those acting for GCG, that AC/JV attempted to avoid having to pursue the injunction application. The evidence demonstrates that AC/JV raised the Rooney Earthmoving decision to GCG’s attention on numerous occasions prior to filing its application. It was only when GCG declined to suspend the expert determination that AC/JV’s solicitors filed the application. In my judgment I found that the Rooney Earthmoving decision “dealt with a very similar factual situation” and was “authority for the proposition that an expert can only be
7 Rooney Earthmoving Ltd v Infinity Farms Ltd [2022] NZHC 2078.
invited to make a determination at a time when the contractor is on site and engaging in physical works”,8 or, in other words, the exact proposition AC/JV said it stood for in its earlier correspondence with GCG. If GCG had accepted the proposition, it would not have pursued the expert determination in those circumstances. However, it did not do so, and AC/JV’s application accordingly followed shortly afterwards. I do not accept GCG’s submission that the injunction application was inevitable and not caused by it. It was only necessary because GCG chose to pursue an expert determination process despite being referred to clear authority to the effect that such an expert determination was not appropriate in factually very similar circumstances.
[16] GCG also suggests that there was an unreasonably short timeframe within which it was required to give its agreement to suspend the expert determination. AC/JV’s lawyer requested in its 11 August 2023 letter to have a response confirming agreement by 1pm that day. This was only a matter of hours after receipt of the letter. However, the application was not filed until 14 August 2023. I do not doubt that despite the time requested for confirmation of such agreement, agreement at a later time in the following few days prior to the ultimate filing of the application would have been sufficient for AC/JV’s purposes, given the injunction would then have been unnecessary. As such, I do not accept GCG’s point that the timeframe was unreasonably short. To the extent AC/JV perceived there was urgency, I consider this was the result of GCG’s attempt to proceed with the (inappropriate) expert determination process.
[17] AC/JV seeks an uplift of 50 per cent in light of these circumstances. Rule 14.6 provides for an award of increased or indemnity costs in certain circumstances. Rules 14.6(3)(b)(ii) and (iii) provide that increased costs may be awarded where the opposing party has contributed unnecessarily to the time or expense of the proceeding by pursuing an argument that lacks merit, or by failing, without reasonable justification, to accept a legal argument. The onus is on AC/JV to demonstrate that an award of increased costs is justified.9
8 AC/JV Holdings Ltd v General Construction Group Ltd, above n 1, at [62].
9 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [27].
[18] The determination of costs should be predictable and expeditious. Increased costs are regarded as an exception to that principle.10 In Henderson v Reddiford, French J, noting that determination of costs should be predictable and expeditious, considered that “something more than mere failure of a factual or legal argument is necessary in order for there to be increased costs under r 14.6(3)(b)(ii).”11 Rather, “[c]lear cause must be shown to justify an increase” from scale costs, and increased costs should only be ordered where there is a failure by the paying party to act reasonably when assessed against the grounds in r 14.6(3).12 Increased costs are only appropriate in “relatively limited circumstances”.13
[19] I consider that the circumstances justify an uplift in this case. GCG failed at every step to act reasonably. In the face of GCG’s refusal to stay the process and its advice that AC/JV would be provided with the expert’s determination in “due course”, AC/JV had little choice but to apply for the injunction. Any urgency on the part of AC/JV in doing so was only as a result of GCG pursuing an expert determination when such a process was inappropriate. In doing so, GCG failed to accept the clear legal position outlined in Rooney Earthmoving, which it was alerted to, and it has not provided any reason as to why this might have been justified.
[20] Given the above factors, I consider an uplift is appropriate. Instances where an uplift has been applied on 2B costs range between 20 and 50 per cent.14 The percentage is unlikely to exceed 50 per cent of scale costs, given the daily recovery rate is two-thirds of the daily rate considered reasonable for the particular proceeding.15
[21] In Stewart v Milano International 2007 Ltd, Fitzgerald J noted that an uplift is designed to recognise the behaviour of the unsuccessful party as having been
10 High Court Rules, r 14.6(3)(d); and see Canaan Farming Dairy Ltd v Westland Dairy Co Ltd
[2022] NZHC 2788 at [13].
11 Henderson v Reddiford HC Christchurch CIV-2009-409-1426, 19 March 2010 at [6].
12 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27]–[28].
13 Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [7].
14 See for example Jarden v Lumley General Insurance (NZ) Ltd [2018] NZCA 6, in which the Court of Appeal upheld the High Court’s award of a 25 per cent uplift; and Baker v Waimakuku Whanau Trust Board Inc HC Napier CIV-2010-441-581, 13 October 2011, where the High Court provided a 50 per cent uplift on an unsuccessful joinder application.
15 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR14.6.02].
unreasonable.16 Her Honour considered that the plaintiffs’ application for an interim injunction was strong and found that “in material respects the defendants appear to have continued their actions with their ‘eyes wide open’ to the claims against them.”17 Her Honour was satisfied that under r 14.6(3)(b)(iii), the first defendant in that case had failed to accept what appeared to be a good legal argument for an injunction to be granted.18 Her Honour considered an uplift of 20 per cent was appropriate.
[22] In GLW Group Ltd v Lepionka & Company Investments Ltd, Associate Judge Smith found that it was inappropriate for the respondent to use a statutory demand procedure in circumstances where the claim was clearly disputed, and the applicant was put to significant expense, including filing a lengthy supporting affidavit, in successfully setting aside the statutory demand.19 The Associate Judge was satisfied that the respondent’s inappropriate use of the statutory demand procedure was alone sufficient to justify an uplift above scale costs, although he did not, in the circumstances of that case, fix a specific percentage for such an increase.20 I consider although the present case involved the purported use of an expert determination procedure, as opposed to a statutory demand procedure, the same reasoning applies.
[23] Hawken Lane Development LP v Property Sales Direct Ltd did not involve an injunction application, but rather an application to remove a caveat.21 Katz J found that the defendant’s attempt to oppose the plaintiff’s application was totally without merit. Moreover, the total lack of merit in its position was pointed out to it in correspondence from the applicant’s solicitor prior to the hearing. Her Honour considered that the misconduct fell short of the threshold of misconduct required for indemnity costs, but found that it was unreasonable for the defendant to continue to try and sustain the caveat in all the circumstances. Her Honour found that an order of increased costs was therefore appropriate, and stated, “[t]he appropriate uplift on 2B
16 Stewart v Milano International 2007 Ltd [2018] NZHC 2925 at [12].
17 At [12].
18 At [12].
19 GLW Group Ltd v Lepionka & Company Investments Ltd [2016] NZHC 1380 at [33].
20 At [34].
21 Hawken Lane Development LP v Property Sales Direct Ltd [2021] NZHC 2021; and see O’Malley v Sting Enterprises Ltd HC Christchurch CIV-2010-409-1656, 15 September 2010.
scale costs is 50 per cent.”22 I consider although that case involved an application to remove a caveat, and not an urgent injunction, similar factors are present.
[24] I consider an uplift of 40 per cent is appropriate in this case. GCG’s conduct in the lead-up to AC/JV bringing these proceedings was unreasonable and that by appearing and making submissions it clearly opposed the granting of the injunction. On that basis, an award of increased costs is justified. However, AC/JV effectively asks for the maximum uplift available under scale costs and I do not think GCG’s conduct rises to a level justifying the maximum uplift available in respect of increased costs. An uplift pitched at 40 per cent recognises this.
[25] Where an argument is found to have lacked merit and been inherently unlikely to succeed, increased costs applies to all steps.23 This is the case here.
[26] The final points to address are whether any corrections need to be made to the scale calculation. GCG contends that item 30 (preparation of affidavits for an affidavit hearing) and item 11 (case management memorandum) should be removed from the calculation of costs.
[27] I decline to remove either item. Item 30 is necessary to reflect the fact that two affidavits were required to be filed in support of the application under urgency. In respect of item 11, it is correct that no case management memorandum has yet been required. However, I consider the inclusion of item 11 is appropriate by analogy, given that AC/JV endeavoured unsuccessfully to agree costs with GCG for costs along the lines of what it now claims. An additional step is necessary to account for the costs in making this costs application and replying to GCG’s memorandum in opposition.
Conclusion
[28] I have concluded that scale costs on a 2B basis are appropriate, with a 40 per cent uplift for increased costs under r 14.6(3)(b)(ii) and (iii).
22 At [21].
23 NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636 at [52]; and Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434 at [57].
[29] Accordingly, I award costs to the applicant, AC/JV, against the first respondent, GCG, in the order of $13,216.70, plus disbursements of $478.26. I note this is exclusive of GST.
Churchman J
Solicitors:
Thinn & Co, Auckland for the Applicant
Van Aart Sycamore, Dunedin for the First Respondent
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