Bilkey v Kyriak
[2021] NZHC 264
•25 February 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1822
[2021] NZHC 264
BETWEEN ROBERT MACKENZIE BILKEY, LYNNETTE MARGARET BILKEY and HAURAKI TRUSTEE SERVICES (2008) LIMITED
AppellantsAND
MICHAEL THOMAS KYRIAK and CHRISTINA MOIRA JUDITH CIE
Respondents
Hearing: 16 February 2021 Appearances:
W McCartney for Appellants Respondents in person
Judgment:
25 February 2021
JUDGMENT OF LANG J
[on appeal against award of costs]
This judgment was delivered by me on 25 February 2021 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Solicitors:
Duncan King Law, Auckland
W McCartney, Barrister, Auckland
Copy to: Respondents
BILKEY v KYRIAK and [2021] NZHC 264 [25 February 2021]
[1] This appeal arises out of a dispute between neighbours regarding a letterbox and a fence. As is common in such cases, the dispute has generated significant heat and animosity between the parties notwithstanding its apparently trivial nature. It resulted in a substantive hearing in the District Court that lasted more than three days followed by an appeal to this Court.
[2] The present appeal is a challenge to an award of costs made in favour of the respondents, Mr Kyriak and Ms Cie, following determination of the substantive dispute in the District Court. Judge P A Cunningham held that Mr Kyriak and Ms Cie were the successful parties at trial and should receive an award of costs in their favour.1 She reduced the award by 50 per cent to reflect the fact that they failed to establish one cause of action and evidence about this had occupied a considerable amount of time at trial. She reduced it by a further five per cent to reflect the fact that Mr Kyriak and Ms Cie had applied unsuccessfully at a late stage to add a new cause of action in defamation. They also failed to comply with their discovery obligations.
[3]Mr and Mrs Bilkey appeal against the Judge’s decision.
Background
[4] Mr and Mrs Bilkey, together with an associated company, were the registered proprietors of the land situated at 22 Arney Crescent in Auckland. They agreed to sell a portion of the land, known as 22A Arney Crescent, to Mr Kyriak and Ms Cie. The property situated at 22A Arney Crescent is at the rear of 22 Arney Crescent and is accessed by a steep driveway leading down from Arney Crescent.
[5] Settlement was delayed whilst an existing cross-lease arrangement was cancelled and the land was subdivided into two separate freehold titles. Pending completion of these matters Mr Kyriak and Ms Cie rented and lived in 22A Arney Crescent. The sale and purchase of 22A Arney Crescent was eventually completed on 25 September 2013.
1 Kyriak v Bilkey [2020] NZDC 16722.
[6] When the parties entered into the agreement for sale and purchase the letterbox for 22A Arney Crescent was situated in one of a pair of brick pillars located on either side of the entrance of the shared driveway. The letterbox for 22 Arney Crescent was located in the pillar on the other side of the driveway. Matters initially proceeded smoothly so far as the use of the letterbox for 22A Arney Crescent was concerned. In April 2015, however, a building contractor engaged by Mr and Mrs Bilkey accidentally damaged the pillar containing the letterbox for 22A Arney Crescent. The contractor then demolished the pillar and a short time later installed another pillar that did not contain a letterbox for 22A Arney Crescent.
[7] This led to the dispute that culminated in Mr Kyriak and Ms Cie commencing proceedings in the District Court. Prior to trial Mr Kyriak and Ms Cie obtained interim injunctive relief that entitled them to the use of a letterbox in the new pillar as had previously been the case. They then installed another freestanding letterbox behind the new pillar.
[8] Mr Kyriak and Ms Cie advanced four causes of action against Mr and Mrs Bilkey in the District Court proceeding. Three of these related to the letterbox whilst the fourth related to a boundary fence between 22 and 22A Arney Crescent. The causes of action relating to the letterbox comprised a claim to entitlement to an implied grant of easement for use of a letterbox at the top of the driveway and an allegation that the agreement for sale and purchase contained an implied term that the purchasers of 22A Arney Crescent were entitled to have the use of a letterbox at that location. Mr Kyriak and Ms Cie also advanced a claim based on equitable estoppel. In the cause of action relating to the fence Mr Kyriak and Ms Cie sought an order requiring Mr and Mrs Bilkey to meet one-half of the costs required to install a new boundary fence between the two properties, together with a gate.
[9] The proceeding resulted in a trial of three and a half days duration in December 2019. In a judgment delivered on 17 December 2019 Judge Christiansen found in favour of Mr Kyriak and Ms Cie on the three causes of action relating to the letterbox.2 He dismissed the claim relating to the fence on the basis that the existing fence could
2 Kyriak v Bilkey [2019] NZDC 25227.
be repaired and did not require the erection of a new fence. The Judge also considered Mr Kyriak and Ms Cie should be required to meet all or most of the costs of rectifying the defects of the existing fence.3
[10] Mr and Mrs Bilkey sought to appeal against Judge Christiansen’s decision. By the time their appeal was heard the costs payable on the District Court proceeding had not yet been fixed. By that stage Mr and Mrs Bilkey had sold the property at 22 Arney Crescent. Furthermore, the new owners of that property had agreed to grant Mr Kyriac and Ms Cie a registered easement permitting them to place and maintain a letterbox at the top of the driveway in the same location as the original letterbox. Mr and Mrs Bilkey argued that their appeal should nevertheless be determined on its merits because it raised important issues that might affect the costs payable in the District Court proceeding. Davison J rejected this argument and dismissed the appeal on the ground that the issues it raised were moot.4
The costs decision
[11] Unfortunately, Judge Christiansen died before determining the issue of costs payable in the District Court proceeding. As a result, that issue fell to be determined by Judge Cunningham.5 In a decision delivered on 26 August 2020, and re-issued on 7 September 2020, the Judge held that Mr Kyriak and Ms Cie had been the successful parties in the proceeding because they had succeeded on three of the four causes of action pleaded.6 As already mentioned, the Judge reduced the costs payable to them by 50 per cent to reflect the fact that Mr and Mrs Bilkey had succeeded on the issue relating to the fence and this had occupied nearly one-half of the hearing time in the District Court. The Judge then reduced the award of costs by a further five per cent to reflect the failure of Mr Kyriak and Ms Cie to comply with their discovery obligations. That reduction also reflected the fact that they had applied unsuccessfully at a late stage to add a further cause of action in defamation.
3 At [50].
4 Bilkey v Kyriak [2020] NZHC 1264 at [29]-[33].
5 Under r 14.9 of the District Court Rules 2014.
6 Bilkey v Kyriak, above n 1.
[12] This resulted in Mr Kyriak and Ms Cie receiving an award of costs calculated on a Category 2B basis but reduced by 55 per cent to reflect the factors to which I have referred. Mr Kyriak and Ms Cie also obtained costs relating to the hearing in which they were granted pre-trial interim injunctive relief. Finally, Mr Kyriak and Ms Cie were held to be entitled to recover their disbursements.
Grounds of appeal
[13] On Mr and Mrs Bilkey’s behalf Mr McCartney advances three grounds of appeal:
(a)The Judge erred in fixing the costs payable to Mr Kyriak and Ms Cie without setting those costs off against the costs payable to Mr and Mrs Bilkey on the cause of action relating to the fence.
(b)Mr and Mrs Bilkey were entitled to costs, or a further reduction of costs, because Mr Kyriak and Ms Cie failed to accept a reasonable settlement offer prior to trial.
(c)The Judge ought to have reduced the costs payable to Mr Kyriac and Ms Cie by more than five per cent to reflect their failure to comply with their discovery obligations.
Appellate approach
[14] There was some debate between counsel as to whether the appeal relates to the exercise of a discretion or whether it is a general appeal by way of re-hearing. If the former, the principles referred to by the Court of Appeal in May v May7 and confirmed by the Supreme Court in K v B8 will be relevant. These require the appellants to show error of principle or demonstrate that the Judge failed to take into account a relevant matter or took into account an irrelevant matter. Alternatively, they must show the decision was plainly wrong. In the case of a general appeal the appellate court will be
7 May v May (1982) 1 NZFLR 165 (CA) at 170.
8 K v B [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
required to reach its own view of the correctness of the decision subject to appeal but the onus remains on the appellant to show why the decision is in error.9
[15] In the present case the appeal clearly relates to the exercise of a discretion, although the exercise of that discretion is constrained or fettered by the costs regime contained in the District Court Rules 2014. Good reason will be required to depart from the regime prescribed by the Rules.10 As a result, and with that caveat, the approach identified in May v May is appropriate.11
Did the Judge err in failing to set off one set of costs against the other?
[16] Mr McCartney’s submission under this ground is based on observations that the Judge made when considering how Mr and Mrs Bilkey’s successful defence of the claim relating to the fence should be recognised for the purpose of fixing costs:12
[46] This cause of action failed. That means that there should be an award of costs in favour of the defendants (the successful party) and not in favour of the plaintiffs (the unsuccessful party). Rule 14.2 of the District Court Rules 2014 says:
14.2 Principles applying to the determination of costs
(1)(a) The party who fails with respect to a proceeding or a interlocutory application should pay costs to the party who succeeds.
…
[47] I accept the defendants’ submission that the time spent on a cause of action during a trial can be better calculated by the transcript of the hearing, rather than the amount of time spent on it in the judgment. In this case it was approximately 45% of 3.5 hearing days.
[48] Having said that, the fencing cause of action was straightforward from a legal perspective. The letterbox causes of action were three in number had separate legal bases. That factor would justify a small reduction in a costs award on the basis that the preparation work for trial was not complex. I therefore estimate the time spent on the fence cause of action was 40%.
[17] Mr McCartney contends these passages show the Judge concluded, correctly in his submission, that Mr and Mrs Bilkey were the successful parties in relation to the
9 Austin Nichols & Co v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4].
10 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7].
11 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36.
12 Kyriak v Bilkey, above n 1.
cause of action relating to the fence. Using the percentage figure adopted by the Judge Mr McCartney contends Mr and Mrs Bilkey were entitled to an award of costs calculated as being 40 per cent of scale costs on a successful claim. He calculates this as amounting to $14,584.
[18] Mr McCartney also points out that r 14.16 of the District Court Rules 2014 provides as follows:
14.16 Set-off if costs allowed to both parties
If opposite parties are awarded costs against each other, their respective costs must be set off and the lesser sum must be deducted from the greater, unless the court otherwise directs.
Mr McCartney submits the costs payable to Mr and Mrs Bilkey to recognise their success on the claim relating to the fence ought to have been set off against any costs payable to Mr Kyriak and Ms Cie on the claim relating to the letterbox.
[19] I agree that the passages from the Judge’s decision set out above suggest she considered Mr and Mrs Bilkey were entitled to an award of costs to mark their success on the fourth cause of action. It is clear, however, that the Judge did not ultimately make a separate award of costs to reflect that fact. Rather, she reduced by 50 per cent the scale costs that would otherwise be payable by Mr and Mrs Bilkey to reflect the fact that they had succeeded in defending the fourth cause of action relating to the fence.
[20] Mr McCartney endeavoured to raise the same issue when he applied on Mr and Mrs Bilkey’s behalf for an order recalling the costs judgment. Judge Cunningham re- issued her decision on 7 September 2020 disallowing costs she had originally awarded for two steps in the proceeding that she accepted were not payable. The Judge declined, however, to revisit the overall quantum of costs awarded. The Judge explained her reasoning regarding this issue as follows:13
[69] I do not have any jurisdiction to change my decision to change the award of costs to the plaintiffs of 45%. I calculated the amount of time the fence issue took and said that the defendants were successful on this cause of action. Paragraph [63] of my decision states that the reduced costs award to
13 Kyriak v Bilkey above n 1.
the plaintiffs of 45% took into account the defendant’s success on the fence issue. Any change to the percentage award of costs to the plaintiffs is substantive and the proper avenue for complaint is an appeal.
[21] Mr McCartney’s submission effectively treats his clients’ successful defence of the claim relating to the fence as if it was a successful counterclaim. Had that been the case the requirement for set-off under r 14.16 would be applied. A successful counterclaim is, however, entirely different to the successful defence of part of a plaintiff’s claim. The principles that apply to costs in the latter situation are contained in r 14.7(d) of the District Court Rules 2014. This provides that costs may be refused or reduced when the party who has been successful overall nevertheless fails in relation to a cause of action or issue that significantly increased the costs of the unsuccessful party.
[22] Regardless of the wording used at [46] of her decision I am satisfied the Judge reduced the costs that would otherwise be payable to reflect the fact that the defendants had successfully defended part of the plaintiffs’ claim. This approach was therefore in accordance with the principles set out in r 14.7(d) and entirely orthodox.
[23] Mr McCartney also argued that the present case differs from most cases in which the principles contained in r 14.7(d) are applied. He says the rule is designed to apply in cases where the same set of facts underpins several different and alternative claims. By way of example, the same factual matrix may lead to claims based in misrepresentation, mistake and breach of the Fair Trading Act 1986. The plaintiff may only succeed in establishing one of these, but this will generally justify the court declaring the plaintiff to have been the successful party. In such a case the court may nevertheless reduce the costs that would otherwise be payable to the plaintiff by making an order under r 14.7(d). This reflects the fact that the defendant was put to the time and expense of defending aspects of the plaintiff’s claim that were ultimately unsuccessful.
[24] In submissions filed with leave following the hearing Mr McCartney drew my attention to the decision of the Court of Appeal in Packing In Ltd (In Liquidation) v Chilcott and Chatfield.14 In that case the liquidators of a company had filed a notice
14 Packing In Ltd (in Liquidation) v Chilcott and Chatfield (2003) 16 PRNZ 869.
in the High Court setting aside 14 transactions the company had entered into with the appellant prior to being placed in liquidation. The appellant then filed an application seeking orders under s 294(2) of the Companies Act 1993 that the transactions not be set aside. Master Faire (as he then was) granted the application in relation to 11 of the 14 transactions having a total value of $60,970.79.15 He dismissed the application in relation to the remaining three transactions having a total value of $51,374.17. In fixing costs the Master held that the liquidators had been the successful party overall and awarded them costs on that basis.16 The appellant sought leave to appeal against the Master’s decision.
[25] The Court of Appeal ultimately determined not to grant leave to appeal for reasons other than the merits of the proposed appeal. The Court nevertheless made the following observations by way of obiter comment:17
[5] In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case.
[6] In the present kind of litigation, the liquidator of the company disadvantaged by allegedly voidable transactions must necessarily take the first step of filing in Court the prescribed notice to set aside. That is what the statutory process requires. Whether this be a “proceeding” or not (and we are inclined to the view that it is not), it is a mandated step if liquidators wish to assert that transactions are voidable. The beneficiary of such transactions may seek to retain their benefit by seeking an order that they be not set aside. Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.
[7] We therefore consider that the Master’s approach to the issue of who succeeded or failed in this case was too absolute. It would tend to create inappropriate consequences: reluctance to apply for orders that transactions be not set aside for fear of failing to have them all validated, and, conversely, encouragement to set aside too readily. We do not, however, have to examine the consequences of our conclusion because we consider Bond should not have special leave to appeal out of time. As noted earlier, there is no
15 Bond Cargo Ltd v LG Chilcott and PC Chatfield HC Auckland M 568SD99, 4 July 2002.
16 Bond Cargo Ltd v LG Chilcott and PC Chatfield HC Auckland M 568SD99, 10 September 2002.
17 Packing In Ltd v Chilcott, above n 14.
satisfactory explanation for the relevant periods of delay. No injustice arises to any of Bond’s creditors, because there are none, except WSA. It is obviously not prejudiced by our refusing leave because that it what is has urged us to do.
[26] I do not consider the approach identified in these passages supports Mr McCartney’s submission that Mr and Mrs Bilkey ought to have received a separate award of costs for the cause of action relating to the fence. It goes no further than to suggest that in some cases costs should be determined having regard to a realistic appraisal of the end result. Furthermore, in Weaver v Auckland Council the Court of Appeal subsequently pointed out that the applicant in Packing In retained the benefit of approximately the same sum as it was required to pay to the liquidators.18 As a result, it was more akin to a situation involving equally successful claimants and counterclaimants. That is obviously different to the situation in the present case.
[27] It follows that none of the arguments advanced by Mr McCartney persuades me the Judge erred in concluding Mr Kyriak and Ms Cie were the successful parties overall. Nor do I consider the Judge erred in principle by reducing the costs that would otherwise be payable to them under r 14.7(d) to reflect the limited success achieved by Mr and Mrs Bilkey in defending the claim relating to the fence.
[28]This ground of appeal fails as a result.
The prior offers of settlement
[29] The principle that costs should generally follow the event may be displaced when the unsuccessful party makes a pre-trial offer of settlement that proves to be superior to the outcome the successful party achieves at trial. Such offers are commonly made on a without prejudice basis other than in relation to costs. This means they cannot be raised or referred to by the other party at trial.
[30] The costs regime in the District Court codifies the circumstances in which pre- trial offers may affect the incidence and/or quantum of costs following trial. Rules
14.10 and 14.11 of the District Court Rules 2014 provide
18 Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379 at [25].
14.10Written 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.
(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.
14.11Effect on costs
(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
(2)Subclauses (3) and (4)—
(a) are subject to subclause (1); and
(b)do not limit rule 14.6 or 14.7; and
(c)apply to an offer made under rule 14.10 by a party to a proceeding (party A) to another party to it (party B).
(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—
(a)offers a sum of money to party B that exceeds the amount of a judgment obtained by party B against party A; or
(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
(4)The offer may be taken into account if party A makes an offer that—
(a)does not fall within subclause (3)(a) or (b); and
(b)is close to the value or benefit of the judgment obtained by party B.
[31] In addition, r 14.7(e)(v) permits the court to reduce or refuse to make an order for costs in favour of a successful party if that party failed, without reasonable justification, to accept an offer of settlement. This will apply whether the offer takes the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.
[32] Both sets of rules reflect the policy consideration that litigants, and in particular defendants, should have some economic means of limiting their exposure to the risk
of costs. In addition, court proceedings involve public expenditure. The courts must therefore ensure that procedures of this type operate as an effective encouragement to settle.19
[33] In the present case the issue arises out of an exchange of letters that took place between 4 and 14 December 2017. On 4 December 2017 Mr and Mrs Bilkey’s solicitor sent an open letter to Mr Kyriak and Ms Cie containing the following offer:
3.The letterbox:
a)When you bought the property at 22A Arney Crescent, there was a brick pillar at the top of the right of way, on our client’s land, in which there was a cavity that you used as a letterbox. On the front of the pillar was the number 22A in brass characters. That number, according to your statement of claim, is how you first identified the property.
b)Other than the cavity, there was no actual letterbox for your use. Neither the title to your land nor the title to our clients’ land included any legal right for you to have or use a letterbox on our clients’ land included any legal right for you to have or use a letterbox on our clients’ land. Notwithstanding that, you claim to have such a right.
c)The original brick pillar encroached onto the neighbouring property at 24 Arney Crescent. The reason for the removal of the original pillar is disputed, and we do not comment on that. When the new pillar was built, it was made smaller, so that it did not encroach on 24 Arney Crescent. Because the pillar was smaller, it did not have room for a cavity similar to that in the original pillar.
d)To settle the letterbox issue, our clients offer to demolish the existing pillar and build in its place a new pillar of the same dimensions as the original pillar, and containing a cavity of the same dimensions of the original cavity. They still have the original brass 22A characters, which they will put on the front of the pillar.
e)That will restore your position to exactly what it was when you bought your property. In addition, our clients are willing to enter into a contractual licence granting you the use of the cavity for such time as both you and they own your respective properties. That would put you in a better legal position than when you bought your property.
f)Our clients would bear the costs of demolition of the existing pillar and construction of the new pillar. The new pillar would have to extend slightly further into the right of way given that
19 Moore v McNab (2005) 18 PRNZ 127 (CA) at [56]-[58].
it will be larger than the existing pillar, in order to avoid again encroaching onto 24 Arney Crescent.
g)The existing parcel box which you have installed would be removed.
4.The fence
a)Our clients are willing to carry out repairs to the fence at their cost. That would include replacement of framing where necessary and installation of new palings on your side of the fence.
b)Your statement of claim assets that the fence is on the boundary at its western end, but on our clients’ property at its eastern end. Our clients’ statement of defence accepts that to be the case.
c)The eastern end is thought to be no more than about 300mm on our clients’ side of the boundary. Obviously, that allows you use of a small part of our clients’ land. They have no objection to that.
d)There are two solutions to your complaint that you cannot install a gate on the boundary that will line up with the fence:
i.you could install a gate slightly on our clients’ side of the boundary (300mm or thereabouts), so that it lines up with the fence. Our clients have no objection to that; or
ii.our clients will build a small return (300mm or thereabouts) from the eastern end of the fence to the boundary, at their cost. You could then install a gate on the boundary, which will meet the return.
…
[34] Mr Kyriak did not accept this offer. In a letter dated 8 December 2017 he enquired whether the new pillar would be a replica of the original pillar so that it would have both a brass letter flap and newspaper ring. He also made it clear that he and Ms Cie wanted a registered easement to safeguard the continued right of the occupants of 22A Arney Crescent to use the letterbox at the top of the driveway:
…
Your clients’ offer is also to provide only a contractual right for the letterbox only for the use of us as the current owners of 22a Arney Crescent as long as your clients are owners of 22 Arney Crescent.
Contrary to your particular 3 e), this will not be an improvement in our legal position as it is not transferable with the sale of either property. As we have
indicated before, this is not acceptable to us as it does not provide a continuing legal right to use the letterbox attaching to the land. This could be achieved by way of a legal registered easement showing the area that the letterbox is located in on the right of way and we would be prepared, subject to agreement on all other matters, to proceed if your clients agreed to this.
For these reasons unfortunately, we cannot accept your clients’ offer as regards the letterbox.
…
[35]On the issue of the fence Mr Kyriak observed:
Regarding repairs proposed in your paragraph 4a – it seems that Mr Bilkey’s position has shifted from no repairs being necessary, to some of the timber palings requiring replacement to now including replacement of some of the framing. Mr Bilkey also proposes replacing palings on our side of the fence, although access to the palings is from his side of the fence.
From this, we do not have confidence in Mr Bilkey’s ability to assess the repairs needed or his ability to adequately repair this fence which is at least twenty years old, if not older. It would be more appropriate for an independent fencing contractor to assess the state of the fence and conduct the work needed.
In your clients’ settlement offer, the Bilkeys do not propose to move the fence to the boundary and state that this allows us to use a small portion of their land, to which they have no objection (our paragraph 4c). This is inconsistent with Mr Bilkey’s email earlier on the same day as this settlement offer was made. In that email, he instructs us to move our garden back to the boundary, although it appears from the proposed repairs in this settlement offer that all repairs are best conducted from his side of the fence and with no need to access this silver of land. This attitude does not give us confidence in the Bilkey’s current proposal to allow us to install a gate or return on their land.
Also, as with the letterbox proposal, they do not propose an ongoing and transferable right such as an easement that would secure such a gate or return between the owners and future owners of 22 and 22a Arney Crescent.
For these reasons unfortunately, we cannot accept your clients’ offer as regards the fence and gate.
…
[36] Mr and Mrs Bilkey’s solicitors reiterated their earlier offer in a letter dated 14 December 2017 with the following amendments:
3.The Brick Pillar:
a)The pillar would be rebuilt to the same dimensions as the original, including the brass newspaper ring and brass letter flap, as existed when you bought the property.
b)You would not own the pillar.
c)Our clients will not grant you a registered easement for the use of the pillar. There was no registered easement when you bought the property.
d)The pillar work would be completed within four months of agreement.
e)Our clients will not pay you anything.
4.The Fence
a)Mr Bilkey’s email of 4 December 2017 may be ignored.
b)Work on the fence would require access to your property.
c)Our clients will not share the cost of an automatic sliding gate. They will carry out the work on the fence at their cost; you would bear the cost of any gate.
d)The work on the fence would be completed within 4 months of agreement.
e)Our clients will not pay you anything.
…
[37]The Judge dealt with this issue as follows:20
[56] I accept the submission of the defendants that open settlement offers are relevant to costs. They do not have to be made without prejudice save as to costs. For the foregoing reasons, I do not accept that the plaintiffs received less under the judgment than they would have received pursuant to settlement offers made by the defendants. It follows that those settlement offers are not relevant to the issue of costs.
From the preceding paragraphs of the Judge’s decision it is difficult to discern, however, why she considered Mr Kyriak and Ms Cie did not receive less under the judgment than they would have received if they had accepted offers made by Mr and Mrs Bilkey.
[38] Mr McCartney submits Mr and Mrs Bilkey are entitled to an award of costs in their favour under rr 14.10 and 14.11. He says the offers they made in the letters dated 4 and 14 December 2017 were superior to the outcome Mr Kyriak and Ms Cie ultimately achieved. In particular, he points out that Mr and Mrs Bilkey offered to
20 Kyriak v Bilkey, above n 1.
repair the fence at their own cost. Mr Kyriak and Ms Cie failed completely at trial in their claims relating to the fence.
[39] Mr McCartney also contends Mr Kyriak and Ms Cie did not achieve a superior outcome under the judgment in relation to the letterbox. In particular, they did not obtain a registered easement as they sought in pre-trial negotiations and in their statement of claim. He points out that, although Judge Christiansen found Mr Kyriak and Ms Cie had established their claims relating to the letterbox, he made no consequential or ancillary orders. As a result, Mr Kyriak and Ms Cie did not improve their position beyond the contractual right to use the letterbox that Mr and Mrs Bilkey had already offered.
[40] Mr Kyriak contends a jurisdictional issue arises in relation to the application of rr 14.10 and 14.11 in the present case. He says Mr and Mrs Bilkey cannot rely upon them to obtain an award of costs in their favour because their letters dated 4 and 14 December 2017 did not meet the requirements imposed by those rules. They were expressly stated to be open offers and not without prejudice save as to costs as required by r 14.10(1)(a). In addition, Mr and Mrs Bilkey produced the letters at trial and therefore breached the requirement imposed by r 14.10(2).
[41] I accept Mr Kyriak’s submissions on this point. The pre-trial offers by Mr and Mrs Bilkey do not qualify to be taken into account for the purposes of rr 14.10 and
14.11 because they do not meet the mandatory requirements prescribed by those rules. I do not consider the costs regime prescribed by those rules applies to offers that do not meet the threshold requirements they impose.
[42] This does not mean Mr and Mrs Bilkey’s pre-trial offers are irrelevant to the issue of costs. Rule 14.7(e)(v) expressly permits the court to refuse to make an order for costs, or to make an order for reduced costs, where the successful party has without reasonable justification refused an offer of settlement. The rule applies both to offers made under r 14.10 and other offers to settle or dispose of the proceeding.
[43] I consider there can be no doubt that Mr Kyriak and Ms Cie were left in a worse position following the hearing than they would have been if they had accepted Mr and
Mrs Bilkey’s offer in relation to the fence. They achieved nothing from that cause of action following trial whereas acceptance of the offer relating to the fence would undoubtedly have improved their position notwithstanding Mr Kyriak’s misgivings about it.
[44]However, the test under r 14.7(e)(v) is not the same as that under r 14.10 and
14.11. The test under those sections is whether the party who declines the offer is effectively in a worse position following judgment than would have been the case if the offer had been accepted. The test under r 14.7(e)(v) is whether the party fails without reasonable justification to accept the offer. A person may have reasonable justification for declining an offer even if they are ultimately in a worse position following judgment.
[45] So far as the fence is concerned, I consider the reasons given by Mr Kyriak in his letter dated 8 December 201721 for rejecting the offer in relation to the fence arguably provide reasonable justification for not accepting it. The letter from Mr and Mrs Bilkey’s solicitors dated 14 December 2017 did not advance matters greatly so far as the fence was concerned. Even if that was not the case, however, the Judge reduced the award of costs by one half to reflect the fact that the claim relating to the fence failed. I do not consider a greater reduction would be required to reflect the rejection by Mr Kyriak and Ms Cie of Mr and Mrs Bilkey’s pre-trial offer relating to the fence.
[46] The position is different in relation to the letterbox because Mr Kyriak and Ms Cie succeeded in large part in establishing their claims under the causes of action relating to the letterbox. It is true, as Mr McCartney submits, that they did not obtain a registered easement as they sought in their statement of claim and during pre-trial negotiations. Judge Cunningham considered it likely that Judge Christiansen overlooked this aspect of their claim.22 She observed that, if the Judge had turned his mind to the issue but determined Mr Kyriak and Ms Cie had no right to a registered easement, he would have said so.
21 Set out above at [34].
22 Kyriak v Bilkey, above n 1, at [51].
[47] That may well be the case but there is no real way of knowing. Putting that issue to one side, I accept Mr Kyriak’s argument that Judge Christiansen’s finding on the claim based on implied grant of easement was important. It meant they had an unassailable right to register a caveat against the title to Mr and Mrs Bilkey’s property to protect the equitable easement the Judge had found to exist. This would give notice to prospective purchasers that the property was encumbered by the easement. It was not necessary for them to register an easement to gain that protection.
[48] Furthermore, as Mr Kyriak points out, it is arguable that he and Ms Cie could have applied for an order requiring Mr and Mrs Bilkey to specifically perform the implied term that the Judge had found in the agreement for sale and purchase. This gave them the right to use a letterbox at the top of the driveway.23
[49] It follows that Mr Kyriak and Ms Cie had reasonable justification for rejecting an offer that gave them only a contractual right relating to the letterbox, especially given the fact that it was only to last as long as Mr and Mrs Bilkey owned their property.
[50] I am therefore satisfied the costs awarded to Mr Kyriak and Ms Cie should not be further reduced to reflect the fact that they rejected the offer relating to the letterbox and fence.
Other matters
[51] I now deal briefly with two further issues Mr McCartney raised in support of his argument that the costs payable to Mr Kyriak and Ms Cie should be reduced below those awarded by the Judge. The first was that the Judge ought to have applied a greater discount than five per cent to reflect the fact that Mr Kyriak and Ms Cie applied unsuccessfully at a late stage to add a cause of action in defamation and they also failed to comply with their discovery obligations.
[52] A reduction of five per cent amounted to approximately $1729 in monetary terms. The only extra step Mr and Mrs Bilkey were required to take in relation to the
23 G W Hinde and others Principles of Real Property Law (2nd ed, LexisNexis, Wellington, 2014) at [15.035].
application to add the new cause of action in defamation was to file and serve a memorandum opposing the application. The application was ultimately dismissed on the papers and without the need for a hearing. Ordinarily costs would be allowed at
.25 of a day, or $445, for filing and serving a memorandum. This means the Judge applied an uplift of approximately $1284, or approximately .75 of a day, to reflect the fact that Mr Kyriak and Ms Cie also failed to comply with their discovery obligations.
[53] Another Judge may have applied a greater uplift to reflect this factor because it caused issues when Mr Kyriak and Ms Cie sought to produce documents at the trial. There is no dispute that the Judge was justified in reducing the costs awarded to reflect this factor. The quantum of costs was, however, very much within the Judge’s discretion. I do not consider the award to have been so low that it could be said to be plainly wrong. There is therefore no justification for appellate intervention.
[54] Next, Mr McCartney submitted the Judge should have reduced costs to reflect the fact that Mr Kyriak and Ms Cie did not comply with the terms of the interim injunctive relief that was granted in their favour. This is alleged to have occurred because Mr Kyriak and Ms Cie elected to install their own letterbox and this did not conform to the description and specifications set out in the orders granting interim relief.
[55] This issue did not put Mr and Mrs Bilkey to further time and expense in defending the proceeding because they elected not to challenge the installation of the new letterbox when it occurred. That was the time for the issue to be raised. It should therefore not be recognised now for the purposes of costs.
Result
[56]The appeal is dismissed.
Costs
[57] Mr Kyriak is a qualified barrister and solicitor. He represented himself and his wife in this Court as he did in the District Court. As a result, he is entitled to recover
costs on the same basis as if he had instructed counsel to appear on their behalf.24 The respondents are accordingly entitled to costs on the appeal.
[58] My tentative view is that costs should be awarded on a Category 2 band B basis together with disbursements as fixed by the Registrar. I would allow costs calculated at .5 of a day to reflect the fact that I requested counsel to file memoranda following the hearing to address the issue of whether authority existed for awarding costs to a defendant who had partially succeeded in defending a claim.
[59] If counsel take a different view they should file memoranda of no more than three pages in length and I will determine costs on the papers.
Lang J
24 McGuire v Secretary for Justice [2018] NZSC 116, [2019] 1 NZLR 335 at [88].
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