Body Corporate 200012 v Keene
[2018] NZHC 814
•27 April 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-1665
[2018] NZHC 814
BETWEEN BODY CORPORATE 200012
Applicant
AND
BRIAN PAUL KEENE QC
First Respondent
DAVID MARTIN CARDEN
Second RespondentNAYLOR LOVE CONSTRUCTION LTD
Third Respondent
Hearing: (On the papers) Counsel:
T J Rainey for Applicant
C J Booth for Third Respondent
Judgment:
27 April 2018
COSTS JUDGMENT OF BREWER J
This judgment was delivered by me on 27 April 2018 at 10:00 am pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Rainey Law (Auckland) for Applicant
Kensington Swan (Auckland) for Third Respondent
BODY CORPORATE 200012 v KEENE & ORS [2018] NZHC 814 [27 April 2018]
Background
[1] Body Corporate 200012 (BC12) and Naylor Love Construction Ltd (Naylor Love) became entangled in disputes arising from a contract between them entered into in 2013. They submitted their disputes to independent adjudicators under the Construction Contracts Act 2002 (the CCA).
[2] The adjudicators upheld the claims of Naylor Love against BC12. One of these was a tranche of claims determined by Mr Keene QC totalling $3,246,215.46. Naylor Love applied to have this determination entered as a judgment of the District Court.1 Judge GM Harrison granted the application in the sum of $2,840,189.94.2
[3] BC12 applied for judicial review of the determination of Mr Keene QC and that of another adjudicator, Mr Carden. They also appealed Judge Harrison’s decision.
[4] On 30 November 2017, I dismissed BC12’s application for judicial review.3 As a consequence, the appeal from the District Court also failed.
[5]Unfortunately, the parties have been unable to agree on costs.
Submissions
[6] The crux of the disagreement is competing interpretations of s 59 of the CCA. This provides, relevantly:
59 Consequences of not complying with adjudicator’s determination under s 48(1)(a)
(1)The consequences specified in subsection (2) apply if a party to the adjudication fails, before the close of the relevant date, to pay the whole or part of the amount determined by an adjudicator.
(2)The consequences are that the party who is owed the amount (party
A) may do all or any of the following:
(a)recover from the party who is liable to make the payment (party B), as a debt due to party A, in any court, −
1 Construction Contracts Act 2002, s 73(2).
2 Naylor Love Construction Ltd v Body Corporate 200012 [2017] NZDC 14435.
3 Body Corporate 200012 v Keene [2017] NZHC 2953.
(i)the unpaid portion of the amount; and
(ii)the actual and reasonable costs of recovery awarded against party B by that court:
(b)if party A is a party who carries out construction work under a construction contract, serve notice on party B of party A’s intention to suspend the carrying out of construction work under the contract:
(c)apply for the adjudicator’s determination to be enforced by entry as a judgment in accordance with subpart 2 of Part 4.
…
[7] Naylor Love seeks actual and reasonable costs from BC12 based upon the combined effect of ss 59(1) and 59(2)(a)(ii). Naylor Love submits that the “costs of recovery” in s 59(2)(a)(ii) include the costs incurred in defending the judicial review application and appeal of the District Court judgment entering the determination of the adjudicator as a judgment.
[8] BC12 argues that entitlement to actual and reasonable costs under s 59(2)(a)(ii) is limited to circumstances where the party with the benefit of the debt brings proceedings in a court to recover the unpaid portion of the amount owing under s 59(2)(a). It does not apply to all proceedings brought under the CCA.
[9] BC12 submits further that the judicial review application was not a recovery proceeding under s 59(2)(a). First, the proceedings were commenced by BC12 (party
B) and not Naylor Love (party A). Secondly, the application was not made to recover unpaid amounts under the two determinations, but rather in an attempt to avoid the obligation to pay.
[10] In addition, BC12’s appeal of Judge Harrison’s decision to enter the adjudicator’s determination as a judgment of the District Court was not a recovery proceeding. Naylor Love’s original application was made under s 59(2)(c). BC12 invokes the distinction drawn by the Court of Appeal between ss 59(2)(a) and 59(2)(c) in Laywood v Holmes Construction Wellington Ltd.4 In that case the Court held that proceedings taken for the recovery of a debt under s 59(2)(a) are subject to the District
4 Laywood v Holmes Construction Wellington Ltd [2009] NZCA 35, [2009] 2 NZLR 243.
Court’s statutory limit (at the time $200,000) whereas an application for an adjudicator’s determination to be entered as a judgment under s 59(2)(c) is not.
[11] BC12 concedes that, as the successful party, Naylor Love is entitled to costs on a 2B basis.
Discussion
[12] Judge Harrison awarded Naylor Love actual and reasonable costs in regard to his entering of the adjudicator’s determination as a judgment of the District Court under s 59(1)(c).5 BC12 appealed against that decision.
[13] Justice Lang allowed the appeal.6 His Honour considered the application of s 59 to entitlement to actual and reasonable costs. I set out relevant portions of his judgment:
[15] Mr Booth relied for his first argument on the following passage from the judgment of Asher J in the High Court in Laywood:7
[16] Mr Hughes for Holmes submitted that s 29 of the District Courts Act was irrelevant, as it did not limit the District Court’s jurisdiction because the enforcement of an adjudication determination was not a proceeding where there was a “debt demand or damages”. I am by no means certain that s 29 can be so narrowly construed. An application to enforce an adjudicator’s determination under s 73(1) must relate to an amount of money and any costs and expenses. Once an adjudicator makes a determination, the amount of that determination can be properly regarded as a debt, and, viewed broadly, the proceeding can be seen as a proceeding for a debt.
(Emphasis added)
[16] Applying these conclusions Mr Booth submits that an application to register a determination as a judgment under s 73 constitutes a recovery proceeding in terms of s 59(2)(a). As a result, an adjudication creditor who utilises the s 73 procedure is permitted to recover its actual and reasonable costs of recovery.
[17] The observations made by Asher J in Laywood at first instance must, however, be viewed in context. In that case his Honour was considering a submission that an application under s 73 of the Act did not engage s 29 of the District Courts Act 1947 because it did not involve a proceeding relating to a “debt, demand or damages”. Asher J rejected this submission on the basis that a sum awarded in an adjudicator’s determination can be regarded as a debt.
5 Naylor Love Construction Ltd v Body Corporate 200012 [2017] NZDC 21263.
6 Body Corporate 200012 v Naylor Love Construction Ltd [2018] NZHC 569.
7 Laywood v Holmes Construction Wellington Ltd [2008] 2 NZLR 493 (HC).
Viewed broadly, therefore, an application to register a determination as a judgment could constitute a proceeding relating to a debt. Asher J ultimately held that the District Court had the jurisdiction to enter a determination as a judgment in excess of the limit prescribed by s 29 not because the application failed to engage s 29 but because s 73 of the CCA conferred that exclusive jurisdiction on it.8 I do not consider the observations made by Asher J in relation to these issues support the proposition that an application under s 73 constitutes a recovery proceeding for the purposes of s 59(2)(a).
[18] I also reject Mr Booth’s alternative argument that s 59(2)(a)(ii) is a stand alone provision that applies to all forms of recovery proceeding. Section 59(2)(a)(ii) is inextricably linked to the remainder of s 59(2)(a). This is demonstrated by the use of the words “by that court” in s 59(2)(a)(ii). Those words cannot stand alone. They necessarily relate back to the words “in any court” in s 59(2)(a). Section 59(2)(a) as a whole can properly be described as a stand alone section but the individual components of it cannot.
[19] I acknowledge that other provisions in the CCA expressly permit a creditor under a construction contract to recover actual and reasonable costs of recovering sums due under the contract but I do not consider this assists Naylor Love. This takes the argument for Naylor Love no further. It merely serves to underscore the fact that in certain situations Parliament has seen fit to allow recovery of such costs. It has not seen fit to do so in the case of an application to enforce an adjudicator’s determination as a judgment of the District Court.
…
[21] I consider the meaning of s 59 to be plain and unambiguous. Where the adjudication creditor chooses to go down the recovery route under s 59(2)(a), it will be able to recover its actual and reasonable costs in doing so. Where it chooses to go down the enforcement route under s 59(2)(c), the provisions of s 59(2)(a)(ii) do not apply. Instead, costs will be at the discretion of the District Court in the usual way… Had Parliament intended to extend the costs regime under s 59(2)(a) to applications under s 59(2)(c) it would have been a simple matter for the section to make that clear. I do not consider it possible to infer that this must be the case.
[14] Justice Lang’s reasoning is applicable to the dispute before me. I agree with his Honour that the entitlement to actual and reasonable costs under s 59(2)(a)(ii) is confined to debt recovery proceedings initiated under s 59(2)(a). This is apparent from the logical construction of the statute.
[15] It follows that Naylor Love is not entitled to recover actual and reasonable costs for its defence of the judicial review application. The proceeding was not one of debt recovery. In addition, it was initiated by the party who owed the debt, not the party to whom the debt was owed. Or rather, the proceeding was brought by party B
8 At [26].
where the statutory language of s 59(2)(a) makes clear that it must be brought by party
A. All of this seems to me to preclude the application of s 59(2)(a) to the current case.
[16] As for the appeal of Judge Harrison’s decision, the same applies. Justice Lang found that the costs in relation to Judge Harrison’s decision should be apportioned under the normal rules for District Court civil trials, not on the basis of what is actual and reasonable. I see no reason for the costs associated with the appeal of the same decision to be treated any differently. In addition, the appeal was essentially decided by the result of the judicial review application, and I note BC12’s submission that Naylor Love spent next to no time on the appeal in isolation. No distinction, therefore, will be drawn between the costs arising out of the judicial review application and the appeal. Naylor Love is not entitled to actual and reasonable costs for either.
[17] I acknowledge the purpose of the CCA is to provide speedy and efficient resolution of construction contract disputes. However, this does not justify awarding actual and reasonable costs in situations where the Act simply does not provide for it. I refer to Lang J’s comments at [19] of his judgment9 and note that, had Parliament intended the successful party in applications for judicial review of adjudicators decisions to be awarded actual and reasonable costs, it would have been straightforward to say so.
[18] I respectfully agree with Lang J that s 59 is clear and unambiguous. A successful party can only recover actual and reasonable costs under this section in relation to a debt recovery proceeding it has initiated.
[19] Having made this finding, the rest of Naylor Love’s submissions fall away. I do not need to consider whether the quantum of costs sought by Naylor Love is reasonable.
2B costs
[20] Naylor Love did not make any submissions in the alternative regarding the quantum of 2B costs.
9 Quoted at [13] above.
[21] BC12 submits that 2B costs of $21,631 are appropriate. This is on the basis of the following time allocation under the Rules, totalling 9.7 days:10
(a)Commencement of defence by defendant (2 days);
(b)Filing opposition to interlocutory application (0.6 days);
(c)Appearance at mentions hearing or callover (0.2 days);
(d)Filing memorandum for first or subsequent case management conference or mentions hearing (0.4 days);
(e)Preparation of briefs or affidavits (2.5 days);
(f)Preparation for hearing (3 days); and
(g)Appearance at hearing for sole or principal counsel (1 day).
[22] Having regard to Naylor Love’s affidavit in support of its application for actual and reasonable costs, there seems little variance between the parties on the steps taken.
Result
[23]Costs are awarded to Naylor Love on a 2B basis as follows:
·Costs: $21,631
·Disbursements: $770.13
Brewer J
10 Schedule 3.
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