Body Corporate 303953 v Queenstown Lakes District Council

[2013] NZHC 2485

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2011-425-000317 [2013] NZHC 2485

BETWEEN

BODY CORPORATE 303953

First Plaintiff

TIAN WANG and ORS
Second Plaintiffs

AND

QUEENSTOWN LAKES DISTRICT COUNCIL
First Defendant

NAYLOR LOVE CONSTRUCTION LIMITED
Second Defendant

TIMARU DISTRICT COUNCIL
First Third Party

AITKEN JOINERY LIMITED
Second Third Party

HAGLEY BUILDING PRODUCTS LIMITED
Third Third Paraty

CALDER STEWART INDUSTRIES LIMITED

Fourth Third Party

FINE FLOORS LIMITED
Fifth Third Party

JAMES WREN & CO LIMITED
Sixth Third Party

CARTER HOLT HARVEY LIMITED
Seventh Third Party

TASMAN INSULATION NEW ZEALAND LIMITED
Fourth Party

Determined on the Papers

BODY CORPORATE 303953 v QUEENSTOWN LAKES DISTRICT COUNCIL [2013] NZHC 2485 [23

September 2013]

Counsel:

R F Harvey and M C Josephson for Plaintiffs C R Goode for First Defendant

C J Booth and J M Hanning for Second Defendant G J Christie and D J Barr for First Third Party

D W Sim for Second Third Party A D Marsh for Third Third Party

A D G Hitchcock for Fourth Third Party R S Cunliffe for Fifth Third Party

M E Parker and A J Nash for Sixth Third Party D M Salmon for Seventh Third Party

K W Fulton for Fourth Party

Judgment:

23 September 2013

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]   In August 2012 the Court was to hear an application by the second defendant for unless orders against the plaintiffs. Those parties settled their differences resulting in consent orders being made on 13 August 2012. At that time I indicated that the plaintiffs were to pay the second defendant’s costs and directed that memoranda were to be filed within certain time limits. Each side filed a memorandum but these were not brought to my attention until I returned to Christchurch from circuit duties, this morning. It is evident that there has been oversight in the Registry and this is regretted.

[2] The second defendant seeks costs on an indemnity basis, or alternatively classification of this proceeding as 3C, and costs uplifted by 50 per cent from that scale. The plaintiffs accept that costs are payable but says they should be awarded on a scale 2B basis.

[3]     First, I am not prepared to reclassify this case from 2B to 3C retrospectively, as there is no justification for doing so. Whilst I did reserve the position in relation to reclassification early on in this proceeding, the time to seek reclassification is in advance of steps being taken which may have cost consequences, not in arrears. That aspect of the application is inappropriate and is rejected. I therefore proceed to consider whether:

(a)This is a case where there should be indemnity costs on the application, or

(b)There should be an increase in costs, as distinct from application of scale 2B.

[4] The second defendant recounts the history of its attempts to obtain proper particularisation of the statement of claim. It notes the directions of the Court on 19 September 2011 and 20 April 2012 that amended statements of claim containing full particulars of the alleged defects in the building, and the cause of those defects, be provided. Counsel refers to subsequent correspondence and notes that the application for an unless order was filed because the required particulars were not provided. Submissions were prepared, and it was only three days before the application was to be heard on a defended basis that agreement was reached for the particulars to be pleaded.

[5]    Counsel for the plaintiffs notes that as a result of the direction I made on 20 February, the plaintiffs filed and served the first amended statement of claim which contained five pages of defects in the building, broken down by the method of construction. It specified the damage caused by each method of  construction, detailed the repairs required to remediate the defects and itemised the repair costs.

[6] The plaintiffs say that the second defendant still did not accept that sufficient particulars had been provided, and required the defects, and their locations, to be broken down between, and within, the units in the building. Further correspondence ensued, and further details of the defects in the building were given in an affidavit filed in support of the plaintiffs’ notice of opposition to the application.

[7]   Early in August the solicitor who had been responsible for this proceeding left the firm acting for the plaintiffs, and another solicitor took over responsibility for the file. This solicitor took the view that some of the requested particulars had not yet been sufficiently provided and agreement was reached that further particulars would be provided, resulting in the fixture not being required.

Discussion

[8] Rule 14.6 provides that the Court may order a party to pay indemnity costs in certain circumstances. The second defendant says that the plaintiffs acted improperly and unnecessarily in steadfastly refusing to provide adequate particulars of their claim, and in defending the second defendant’s application for an unless order. They have twice wilfully ignored and/or disobeyed orders of the Court providing the provision of further particulars.

[9]      The   plaintiffs   refer   to   Bradbury   v   Westpac   Banking   Corporation.[1]

[1] Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA).

Baragwanath J said:

[27] The distinction among our three broad approaches – standard scale costs, increased costs and indemnity costs – may be summarised broadly:

(a)standard  scale  applies  by default  where  cause  is  not  shown to depart from it;

(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and

(c)indemnity  costs  may  be  ordered  where  that  party  has  behaved either badly or very unreasonably.

[28] We acknowledge Sir Rupert Jackson’s report that in practice New Zealand scale costs have been permitted to fall far short of that (p 603). That is, however, a matter for the Rules Committee. Subject to that, the starting point of our rules, which gives a one-third or thereabouts deduction from a set figure, is comfortably in the modern main stream. It affords recognition of the access to justice factor that prevails in the United States and should not lightly be departed from. Clear cause must be shown to justify an increase. Our three-stage classification, with a discretion in each class as to where the order should be pitched, accords with that approach. Indemnity costs, which depart from the predictability of the Rules Committee’s regime, are exceptional and require exceptionally bad behaviour. That is why to justify an order for such costs the misconduct must be “flagrant” (Prebble v Awatere Huata (No 2) [2005] 2 NZLR 467 (SCNZ) at para [6]).

[29] We therefore endorse Goddard J’s adoption in Hedley v Kiwi Co- operative Dairies Ltd (2002) 16 PRNZ 694 at para [11] of Sheppard J’s summary in Colgate-Palmolive Co v Cussons at pp 232 – 234. While recognising that the categories in respect of which the discretion may be exercised are not closed (see r 14.6(4)(f)), it listed the following circumstances in which indemnity costs have been ordered:

(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;

(b)particular misconduct that causes loss of time to the court and to other parties;

(c)commencing or continuing proceedings for some ulterior motive;

(d)doing so in wilful disregard of known facts or clearly established law;

or

(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.

[10] In my opinion the conduct of the plaintiffs in relation to the provision of particulars for their claim falls well short of amounting to conduct where indemnity costs are justified. Certainly, the first order of the Court was not complied with, and there remained issues about particularisation of the claim even after the second order was made. This is, perhaps, a case where the plaintiffs rushed into filing the claim before it had been properly analysed, regrettably not an uncommon fault, and certainly not one to be encouraged. However, experience with cases involving leaky buildings is that full analysis of  what has occurred can be  complex and time- consuming, and can involve a sequential process of analysis in order to derive causes for the effects which are identified. My experience with cases of this kind is that despite case management by way of timetable directions, the true issues evolve over a period, not infrequently because additional parties are added, further discovery is given, and greater analysis is therefore able to be undertaken as the proceeding evolves. Very real caution must be exercised in cases of this kind before undue blame is apportioned to plaintiffs who are faced with a difficult situation, not of their own making, and for which identification of responsibility can be, and frequently is, elusive.

[11] Notwithstanding that, defendants in civil litigation are entitled to know the case they face promptly. They are entitled to the benefit of the case management system, as are plaintiffs. Where plaintiffs remain uncertain about aspects of their case after it has been issued, there is ample scope for them to tell the managing Judge that additional time is required to plot a course through the complex reconstruction of the design and building of the property in question. It is preferable to seek longer periods for the filing and service of amended pleadings and the giving

of particulars, than it is to simply fail to honour commitments made, or to comply with Court orders.

[12] Thus, whilst in the circumstances of complex cases it is not helpful for defendants to be trigger happy with applications for unless orders, equally it is not conducive to the smooth and economic running of litigation for plaintiffs to give the appearance of going to sleep.

[13] I have considered the parties’ competing positions against the background of those observations. The plaintiffs’ actions left a lot to be desired; they could and should have sought amendments to the timetable and they could and should have provided the material sought more promptly. A review of the file by a new solicitor had this effect. Under the control of their former solicitor the plaintiffs did, in the end, provide most of the particulars that were required.  I think it a fair inference that a good deal of the responsibility for the way the plaintiffs dealt with this case through the pleading phase may lie at the feet of their former solicitor, but I refrain from finding that to be the case because I cannot be sufficiently satisfied on the basis of the information I have.

[14] In any event the defendants have been put to additional cost and I have already directed that the plaintiffs must pay costs on the withdrawn application. In my view the plaintiffs have contributed unnecessarily to the time or expense of the proceeding  by  failing  to  comply  with  directions  of  the  Court,  in  terms  of r 14.6(3)(b)(i). An increase in costs over scale 2B is warranted. In all the circumstances, and taking into account all the material put before me by counsel against the background observations I have made in this judgment, I award the second defendant a 25 per cent uplift in costs over scale 2B.

J G Matthews Associate Judge

Solicitors:

Grimshaw & Co, Auckland. (Plaintiffs) Heaney & Co, Auckland. (First Defendant)

Kensington Swan, Auckland. (Second Defendant) Simpson Grierson, Auckland. (First Third Party) Downie Stewart, Dunedin. (Second Third Party)

Saunders Robinson Brown, Christchurch. (Third Third Party) AWS Legal, Invercargill. (Fourth Third Party)
Macalister Todd Phillips, Queenstown. (Fifth Third Party) Anderson Lloyd, Dunedin. (Sixth Third Party)

Lee Salmon Long, Auckland. (Seventh Third Party) Craig Griffin & Lord, Auckland. (Fourth Party)