Auckland Council v Ranfurly Village Limited

[2024] NZHC 1438

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1219

[2024] NZHC 1438

BETWEEN

AUCKLAND COUNCIL

Plaintiff

AND

RANFURLY VILLAGE LIMITED

Defendant

Hearing:	On the papers
Counsel:	P M S McNamara and C J Ryan for Plaintiff R E Bartlett KC and A T Grant for Defendant
Judgment:	31 May 2024

JUDGMENT OF O’GORMAN J

[as to costs]

This judgment was delivered by me on 31 May 2024 at 4 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

Solicitors/Counsel:

Simpson Grierson, Auckland A R Galbraith KC, Auckland

Generus Living Group Ltd, Auckland R E Bartlett KC, Auckland

A T Grant, Barrister, Auckland

AUCKLAND COUNCIL v RANFURLY VILLAGE LIMITED [2024] NZHC 1438 [31 May 2024]

[1]                 On 12 April 2024, I awarded judgment in favour of Auckland Council (Council) in a claim brought against Ranfurly Village Ltd (Ranfurly) seeking judgment on amounts outstanding under three invoices.1 In accordance with my directions, the parties have filed memoranda on the issue of costs. Those have been referred to me for determination.

[2]                 Council has calculated costs on a 3B basis and seeks an uplift of 50 per cent. It claims:

Steps up to and including hearing	$63,893
Steps for determination of costs	$7,413
Costs subtotal	$71,306
Disbursements	$6,130
3B Total	$77,436
Plus uplift (50 per cent x $71,306)	$35,653
Total costs and disbursements sought	$113,089

[3]                 The defendant accepts the 3B calculations, save for objecting to any costs being awarded for the determination of costs. It disputes that any uplift is appropriate. Accordingly, it contends that the total costs and disbursements award on a 3B basis should be $70,023 ($63,893 plus disbursements of $6,130).

Legal principles

[4]                 The Court has a general discretion to award  costs  under  r  14.1  of  the  High Court Rules 2016, but r 14.2 provides a clear statement of the principles to be applied in most cases.

(a)Under r 14.2(1)(a), the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.

(b)Under r 14.2(1)(b), an award of costs should reflect the complexity and significance of the proceeding. For those purposes, r 14.3 provides for three categories of proceeding. Category 3 applies to proceedings that

1      Auckland Council v Ranfurly Village Ltd [2024] NZHC 785.

because of their complexity or significance require counsel to have special skill and experience in the High Court. In this case, the parties jointly agreed this proceeding was appropriately classified as  category 3, and that direction was given by the Associate Judge Taylor on 24 November 2022.

(c)Rule 14.2(1)(c) provides that costs should generally be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application. For those purposes, r 14.5 specifies that a reasonable time is set out in sch 3 for each step, or a reasonable time should be determined by analogy. This is done by reference to whether the step falls within band A, B or C. Band B applies if a normal amount of time is considered reasonable.

(d)Rule 14.2(1)(f) provides that an award of costs should not exceed the actual costs incurred by the party.

[5]                 The integrity of the scale, with its associated value of predictability and certainty, is not to be lightly discarded.2     Subject to that starting position, under       r 14.6(3) the Court has the discretion to order increased costs if:

(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

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

(i)failing to comply with these rules or with a direction of the court; or

2      Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 at [9], upheld in Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding; or

(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[6]                 In terms of r 14.6(3)(b)(v), the assessment of whether increased costs should be awarded for failing to accept a settlement offer, and the extent of any increase, can be impacted by various factors including the following:3

(a)the size of the offer relative to the actual costs of counsel;

(b)the amount of the claim;

(c)the reasonable expectations of the party that refuses the offer;

(d)the amount of preparation for trial already undertaken;

(e)whether the proceeding concerns an uncertain area of law;

3      Weaver v HML Nominees Ltd [2016] NZHC 473 at [30] (footnotes omitted).

(f)whether the parties were in a position to assess the merits when the offer was received;

(g)the information available to the party who receives the offer and the extent to which they can assess the offer.

(h)the timing of the offer;

(i)the conduct of the offeror.

[7]Costs on costs are unusual and the Court is reluctant to award them.4

Party submissions

[8]The plaintiff seeks an uplift on a number of grounds under r 14.6(3)(b):

(a)Settlement offers: In terms of r 14.6(3)(b)(v), Council made three separate offers for settlement and contends that Ranfurly failed to accept those offers, without reasonable justification. In each case, the offer would have achieved a better outcome for the defendant than the result in my judgment.

(b)Unnecessary steps: Council alleges that Ranfurly took or pursued unnecessary  steps  and  arguments  that  lacked  merit  in  terms   of   r 14.6(3)(b)(ii). This included pleading defences that were not substantively pursued at the hearing, triggering related discovery and witness evidence burdens, as well as the necessity of legal submissions addressing that detail. Council also criticises the procedure of pursuing collateral challenges as affirmative defences to a debt collection claim, precluding the summary judgment path and resulting in unnecessary discovery and cross-examination that was inappropriate for judicial review issues.

(c)Unreasonable failure to accept  legal  arguments:  Council  says  that r 14.6(3)(b)(iii) applies, because Ranfurly failed without reasonable justification to admit facts or accept legal arguments.

4      Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Barry Park Investments Ltd v Body Corporate Number 95388 [2016] NZHC 1527 at [25]; and SKP Incorporated v Auckland Council [2019] NZHC 1665 at [9].

(d)Timetable non-compliance: Council also refers to two aspects of non-compliance with the timetable, contending this is relevant under  r 14.6(3)(b)(i).

[9]                 Finally, Council contends that a residual discretion should be exercised under r 14.6(3)(d) to recognise that any shortfall from actual costs will need to be met from public funds, whereas it is more appropriate for Ranfurly to bear a higher proportion of those costs, because the defendant raised public law arguments in an endeavour to obtain a private financial benefit.

[10]In summary, Ranfurly’s response to those arguments is as follows:

(a)Settlement offers: Settlement offers do not automatically point to an uplift in costs. The Court retains a discretion whether to order an uplift, which is only justified if a failure to accept the offer was unreasonable.5

(i)At the time of the 30 May 2022 offer, the parties had not exchanged discovery documents or evidence, so the strength of each party’s respective cases could not yet be assessed.6

(ii)Novel legal points were involved in this proceeding which is recognised in the classification of the proceeding as category 3. Such novelty issues are relevant to the reasonableness of a party refusing a settlement offer, particularly those made early in a proceeding before arguments have been fully developed.7

(iii)For the Council’s most recent settlement offer, that was proximate to the hearing, so should not have any significance for work already undertaken.

5      Intergroup Ltd v Pipe Vision NZ Ltd [2024] NZHC 977 at [52]–[53].

6      Weaver v HML Nominees Ltd, above n 3,at [30]; and McDonald v FAI (NZ) General Insurance Co Ltd (2002) 16 PRNZ 298 (HC) at [21].

7      Blanchett v RBI Ltd [2014] NZHC 2450 at [17].

(b)Unnecessary steps: In respect of the allegation of taking unnecessary steps and pursuing unmeritorious arguments, Ranfurly says it did not abandon its arguments. They remained central to the defences that were actively pursued concerning Council’s failure to implement its policies consistently with the purposes and principles of the Local Government Act 2002 (LGA). The steps taken by counsel preparing defences, discovery and evidence addressing those issues were therefore appropriately required. The fact the defences were unsuccessful is already reflected in scale costs and does not justify any further uplift. In terms of the steps taken of discovery and cross-examination, these were tailored and limited in scope, and Ranfurly should not be penalised for them. The Court should reject Council’s invitation to assume that summary judgment was unavailable only because of Ranfurly’s actions.

(c)Unreasonable failure to accept legal arguments: In terms of the allegation that Ranfurly failed to accept legal arguments without justification, this effectively amounts to an argument that, having succeeded in its arguments that were known to both parties prior to the hearing, the Council should receive an uplift in costs. That principle would apply in most (if not all) proceedings and the appropriate consequence is ordinary scale costs. Uplift requires a party to pursue arguments that are meritless, which is a high threshold. That is not met in this case because the issues were complex and novel. Ranfurly says that its submissions and arguments did all properly engage with the issues that needed to be determined. To the extent that a new argument of Wednesbury unreasonableness was raised at the hearing, this did not lead to further costs being incurred by Council.

(d)Timetable non-compliance: In terms of the two aspects in which the timetable was not complied with, these were immaterial. Council was not prejudiced by receiving the index of documents after the Christmas holiday period rather than shortly before, given that the hearing was still several months away. The two documents that were added late to

the common bundle were appropriately included and had only been omitted inadvertently.

Analysis

[11]              The first settlement offer by Council is dated 30 May 2022. The defendant contends that this was too early to assess the strength of each party’s respective cases because it was before discovery and the exchange of witness statements.

[12]              By 30 May 2022, the defendant must have already carefully considered whether Council was legally entitled to issue the invoices as assessed under the  2015 development contributions policy (DCP) and recover payment as a debt pursuant to s 252 of the LGA. The invoices were already long overdue for payment:

(a)the invoice for block B was due for payment on 20 December 2019;

(b)the invoice for block F was due for payment on 3 December 2020; and

(c)the invoice for block E2 was due for payment on 11 August 2021.

[13]              From the due dates, Ranfurly took the position that the invoices were unfair and/or unlawful, and that the amount should be recalculated under the 2019 DCP. The parties then corresponded about those disputed issues. For example, in a letter dated 21 July 2020, Council explained that s 198(2A) of the LGA requires the Council to apply the policy in force at the time that the application for resource or building consent was submitted. Council also responded to arguments that the Ryman objection decision meant 2015 DCP should not be applied. Council explained that the Ryman objection was based on evidence as to whether that particular retirement village was a “genuine exception to the DCP”, whereas Ranfurly’s arguments were based on its objections to the 2015 policy itself.

[14]              The defendant must have considered its position in further detail before filing its statement of defence on 27 September 2021, and on or around 18 May 2022 when Ranfurly paid the sum of $174,536 to Council contending that this was all that was properly payable. The amount that Ranfurly calculated for payment assumed not only

that the invoices for blocks B, F and E2 would be quantified under the 2019 DCP, but also that previous invoices for development contributions on blocks C and D (already paid) would be revisited.

[15]              Council’s offer of 30 May 2022 did not accept there was any basis for negotiating in respect of the invoices issued and already paid for blocks C and D. Council maintained its position that the development contributions for blocks B, F and E2 were required to be calculated under the 2015 DCP. However, in the interests of resolving the dispute for those particular invoices, Council offered to recalculate the amounts by applying the 2019 DCP, plus interest. The offer included the invoice for block E2 even though it was not yet pleaded, given that it was impacted by the same issues. As noted by Council in its settlement offer letter, this effectively matched a scenario of complete success by Ranfurly for the three invoices for blocks B, F and E2. It would have required an additional $204,019.13 payment, in full and final settlement of all issues arising out of the proceeding. The offer was open for acceptance until 5 pm on 3 June 2022. Council would have prepared the settlement agreement and filed a notice of discontinuance, with no issue as to costs.

[16] Against this background, in my view it was unreasonable for Ranfurly not to accept the 30 May 2022 offer. It would have achieved entire success on Ranfurly’s contention that the assessments for the development contributions on blocks B, F and E2 should be re-made under the more favourable 2019 DCP, even though this was contrary to s 198(2A) of the LGA. In terms of the factors referred to at [6] above:

(a)the offer was generous and at an early stage when both parties would have avoided extensive legal costs;

(b)the offer was at an amount at the very top end of what the defendant could hope to achieve in the proceeding;

(c)the defendant could not have had any reasonable expectation of achieving more, particularly in a context where it had not pursued any objection under s 199C, nor had it commenced any judicial review;

(d)the offer was well before preparation for trial, so most of the costs of the proceeding would have been avoided;

(e)the defendant describes the arguments as novel, but this does not imply merit — the defendant should have appreciated significant risks with pursuing arguments contrary to s 198(2A), particularly if only raised in a collateral way;

(f)the arguments depended on questions of statutory interpretation and policy interpretation (questions of law), rather than any factual issues requiring discovery or witness evidence. I do not accept that the defendant was inhibited from assessing the merits accurately at the point when the offer was received. It had already been one year and five months since it had taken its position of not paying the first invoice;

(g)for the same reason, the defendant had sufficient information to assess the offer within the time frame for acceptance;

(h)the timing of the offer, at an early stage of the proceeding, is to be encouraged — it benefits both parties to resolve matters early; and

(i)there was no relevant disabling conduct on the part of the plaintiff.

[17]              Accordingly, I accept that r 14.6(3)(b)(v) of the High Court Rules applies. The defendant failed, without reasonable justification, to accept the offer of 30 May 2022. In those circumstances, I consider an uplift is appropriate. In my view, a 50 per cent uplift for all the steps taken after 30 May 2022 is fair in the circumstances.

[18]              Otherwise, I would not have awarded an uplift for the remaining grounds relied on by Council.

(a)Even faced with the collateral challenge arguments, under the principles of Air New Zealand Ltd v Wellington International Airport

Ltd,8 summary judgment could still have been sought on the grounds that payment was required in accordance with the doctrine of “relative invalidity”, with the onus then on the defendant to seek interim relief under s 15 of the Judicial Review Procedure Act 2016. This should have resulted in a more orthodox judicial review procedure if the challenges were pursued. In any event, a decision maker facing such a judicial review challenge will often provide a full record of the decision-making process, which may be similar to discovery. To the extent that the emphasis of the defendant’s arguments changed from the pleadings through until the hearing, I do not consider that these clearly justify any uplift, given that the statutory framework needed to be addressed anyway.

(b)I do not consider that the high threshold of meritless arguments is met in terms of r 14.6(3)(b)(iii). In most cases, the unsuccessful party’s failure to accept legal arguments is appropriately addressed with ordinary scale costs.

(c)On the issue of timetable compliance, I accept the defendant’s submission that these were immaterial from a costs perspective.

(d)I do not accept that there is any broader concept that Council is entitled to increased costs to avoid or reduce the shortfall met from public funds. The cases referred to on this point are distinguishable, focussed on reasons for not reducing costs from scale on questions of public interest in terms of r 14.6(3)(c).9

[19]              Finally, I accept that it was reasonable for the defendant to dispute a costs uplift, so costs on costs are not appropriate.

8      Air New Zealand Ltd v Wellington International Airport Ltd [2009] NZCA 259, [2009] 3 NZLR 713 at [86] and [106]; Environmental Protection Authority v Chatham Rock Phosphate Ltd [2016] NZHC 2079 at [77]; and Sunde v Sunde [2018] NZHC 2788 at [45] and [54].

9      Foodstuffs (Auckland) Ltd v Progressive Enterprises HC Auckland, M680/SW02, 13 November 2002; and Norman Tūpuna Maunga o Tāmaki Makaurau Authority [2021] NZHC 944 at [24]−[27] and the cases cited therein.

Result

[20]Accordingly, I award the plaintiff following costs and disbursements:

Steps up to and including hearing	$63,893.00
Plus uplift (50 per cent x $49,067 for steps post-30 May 2022)	$24,533.50
Costs subtotal	$88,426.50
Disbursements	$6,130.00
Total costs and disbursements awarded	$94,556.50

Calculation of judgment amount

[21]The correct quantum of liability for the judgment issued on 12 April 2024 is

$687,514.83, calculated using the Civil Debt Interest Calculator as follows:

(a)Block B: Incurred amount of $259,589.99 on 20 December 2019, with a repayment of $174,536 on 18 May 2022 — debt including interest as at 12 April 2024 is $103,987.15 (interest: $18,933.16);

(b)Block F: Incurred amount of $250,817.94 on 3 December 2020 — debt including  interest  as  at  12   April   2024   is   $276,885.93   (interest: $26,067.99);

(c)Block E2: Incurred amount of $279,911.10 on 11 August 2021 — debt including  interest  as  at  12   April   2024   is   $306,641.75   (interest: $26,730.65).

[22]              As ordered in my judgment dated 12 April 2024,10 interest shall run under s 10 of the Interest on Money Claims Act 2016 on the sum of $687,514.83 from the judgment date of 12 April 2024 until the date of payment.

O’Gorman J

10     Auckland Council v Ranfurly Village Limited, above n 1, at [86].