Body Corporate 388915 v Napier City Council
[2020] NZHC 2720
•15 October 2020
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV-2013-441-402
[2020] NZHC 2720
BETWEEN BODY CORPORATE 388915
First Plaintiff
AND
HBS PANDORA PROP LIMITED & ORS
Second Plaintiffs
AND
NAPIER CITY COUNCIL
First Defendant
ACCL
Third Defendant
PROACTIVE MANAGEMENT LIMITED
Fourth Defendant
PEDDLE THORP & MONTGOMERY LIMITED
Fifth Defendant
PRIMUS LIMITED
Sixth Defendant
EQUUS INDUSTRIES LIMITED
Seventh Defendant
FLAIR DECORATING LIMITED (in
liquidation)
Eighth DefendantCHUBB NEW ZEALAND LIMITED
Ninth Defendant
MICHAEL STRETTON LIMITED
Tenth Defendant
SILVESTER CLARK LIMITED
Eleventh Defendant
AND
MARTIN JOHN FEENEY
First Third Party
BODY CORPORATE 388915 v HBS PANDORA PROP LIMITED & ORS [2020] NZHC 2720 [15 October 2020]
SILVESTER CLARK LIMITED
Second Third Party
SCOTT MURRAY MILLER
Third Third Party
HOLMES STRUCTURES LIMITED
Fourth Third Party
JASON RONALD MILBURN
Fifth Third Party
GEEAL CONSULTING LIMITED (in
liquidation)
Sixth Third PartyANDREW PONT
Seventh Third Party
IAN ROBERT LESLIE
Eighth Third Party
RED STEEL LIMITED
Ninth Third Party
ROBERT JOUGHLIN HAWLEY
Tenth Third Party
NAPIER SANDBLASTING CO LIMITED
Eleventh Third Party
CRAIG MAXWELL ROSS
Twelfth Third Party
STRUCTURAL CONCEPTS LIMITED
Thirteenth Third Party
MARTIN ROOFING CO LIMITED
Fourteenth Third Party
BRIAN JOHN GREENALL
Fifteenth Third Party
RICHARD MICHAEL KAYE
Sixteenth Third Party
PANTON PLUMBING LIMITED
Seventeenth Third Party
ROGER KEITH PANTON
Eighteenth Third Party
WYNANDS MASONRY LIMITED
Nineteenth Third Party
GERRADUS THEODORUS WYNANDS
Twentieth Third Party
AND
STRUCTURAL CONCEPTS LIMITED
First Fourth Party
RED STEEL LIMITED
Second Fourth Party
ACCL LIMITED
Third Fourth Party
PRIMUS LIMITED
Fourth Fourth Party
BRENDAN MATTHEW REISIMA
Fifth Fourth Party
Hearing: On the papers Appearances:
H M Rice/L J Fraser for the First Defendant
Q A M Davies/E-J M Tucker for the Seventh Defendant and Fifteenth Third Party
W J Wenley for Nineteenth and Twentieth Third PartiesJudgment:
15 October 2020
JUDGMENT OF COOKE J
(Costs)
[1] By interlocutory application dated 7 July 2020 the nineteenth and twentieth third parties apply for costs against the first defendant (the Napier City Council), and the seventh defendant/fifteenth third party (Equus Industries Ltd and Brian Greenall). The application is supported by an affidavit of Gerradus Wynands who is the twentieth third party and a director of Wynands Masonry Ltd, the nineteenth third party. The orders are opposed by the Napier City Council and the seventh defendant/fifteenth
third party, and an affidavit of Brian Greenall (the fifteenth third party and managing director of the seventh defendant) has also been filed.
[2] The proceedings involved a multi-party claim involving an apartment building in Napier. The plaintiffs were the owners of apartments in the building, and they alleged that there were a range of design and construction faults. Following mediation the proceedings were settled and notices of discontinuance have been filed. The applicants did not participate in the settlement discussions, and were not parties to the settlement. They had been joined to the proceedings by the Napier City Council, and also subject to cross-claims from the seventh defendant/fifteenth third party. They seek costs under r 15.23 of the High Court Rules 2016 which provides:
15.23 Costs
Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
[3] Written submissions have been provided by the parties and it has been agreed that the applications should be determined on the papers.
Relevant principles
[4] There is no material difference between the parties on the relevant principles to be applied. In FM Custodians Ltd v Pati Abbott AJ said of r 15.23:1
[10] The presumption may be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply.2
[11] The Court is not limited in the factors that can be taken into account when considering whether the presumption is displaced, but the following are matters which are taken into consideration:
(a)As the general rule the Court will not consider the merits of the respective cases (unless they are so obvious that they should influence the costs issue).3
1 FM Custodians Ltd v Pati [2012] NZHC 1902.
2 North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 (HC) at 188; and Kroma Colour Prints Ltd v Tridonicatoato NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12].
3 North Shore City Council, above n 2, at 186; and Kroma Colour Prints Ltd, above n 3.
(b)The Court will consider the reasonableness of the stance of both parties in the proceeding (whether it was reasonable for the plaintiff to bring and continue the proceeding, and for the defendant to oppose and continue to oppose it, up to the point of discontinuance).4
(c)Conduct prior to the commencement of the proceeding may be relevant (for example, if any conduct by a defendant has precipitated the litigation), as may be the reason for discontinuing (for example, where a change of circumstances has made the proceedings unnecessary).5
[12] The Court’s general discretion in relation to costs6 can also override the general principles in relation to discontinuance.7
[5]That approach is generally consistent with that applied in other cases.8
Analysis
[6] The submissions for the Napier City Council and the seventh defendant/fifteenth third party contend that it was legitimate to join the nineteenth and twentieth third parties as they were involved in doing work on the property that was the subject matter of the claims. They then elected not to participate in the mediated settlement discussions, but substantially benefit from the outcome of those discussions.
[7] Reliance is placed on the decision in Body Corporate 81381 v Trebe NZ Ltd (in liq) where it was held that the presumption in r 15.23 was displaced in comparable circumstances.9 Master Gendall held:
[32] … In my view the plaintiffs have acted properly here. By achieving a mediated settlement in this matter, the first defendant has been saved from expending what could have been a considerable amount for costs in defending the substantive proceedings which could well have involved a 4 week trial.
4 North Shore City Council, above n 2, at 187; and Kroma Colour Prints Ltd, above n 2.
5 Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, quoted in North Shore City Council, above n 2, at 187. See also McGechan on Procedure (looseleaf ed, Brookers) at [HR15.23.01], cited in Vector Gas Ltd v Todd Petroleum Mining Co Ltd HC Wellington CIV-2004-485-1753, 7 December 2010.
6 High Court Rules 2016, r 14.1.
7 Oggi Advertising Ltd v McKenzie (1998) 12 PRNZ 535 (HC) at 536; and Kroma Colour Prints Ltd , above n 2.
8 See, for example Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782, [2015] NZCCLR 19 at [20]–[24].
9 Body Corporate 81381 v Trebe NZ Ltd (in liq) HC Wellington, CIV-2003-485-332, 10 September 2003.
[33] I am satisfied that the first defendant has indirectly benefited from the settlement which has been achieved. This has avoided any further claims by the plaintiffs or other parties to the litigation as a result of the settlement.
[8]Similarly in Janes v Benney Bell AJ said:10
[16] For Ms Janes, Ms Sheehan cites Body Corporate 81381 v Trebe NZ Ltd (in liquidation),11 as an example where costs were not ordered against a plaintiff who discontinued against one defendant after the plaintiff had settled with all other defendants. That approach recognises the benefits of settlement. Awarding costs to a defendant who has not participated in a settlement but who has benefited from it by the discontinuance would create a disincentive to settle and may prolong proceedings.
[9] As a general proposition I accept that a party who declines to participate in settlement discussions involving multi-party litigation may be seeking to take unfair advantage of the other participants. That may be the case if they do not engage in, or contribute to a settlement, but then enjoy the fruits of that settlement process. It may not be fair for such a party to be awarded costs under r 15.23.
[10] That was the situation in Body Corporate 81381. But it is significant that that case involved a defendant that had gone into liquidation, and its former shareholders contributed to the settlement. It was a significant party involved in the claim that benefitted from the settlement. The Court described the circumstances as being “an exceptional case which turns on its own particular facts which are unique”.12
[11] Whilst the Court will be concerned that a party not unfairly benefit from a settlement achieved by the efforts of other parties, and will consider the application of r 15.23 with that factor in mind, there can be other relevant circumstances. It is possible that a party has been joined to litigation as part of a general litigation strategy to join many parties and then seek to secure a resolution which calls upon as many resources as possible. A party may only have been joined because of that strategy, even when the case against them was not a strong one. The Court needs to be aware of the dynamics of multi-party litigation, and that the settlement of that litigation can be complicated. It may not simply be a matter of a non-participating party unfairly benefitting from a settlement.
10 Janes v Benney (No 2) [2019] NZHC 2719.
11 Body Corporate 81381 v Trebe, above n 9.
12 At [35].
[12] Wynands Masonry Ltd is a family owned company. It was involved in the supply and installation of tiling and associated waterproofing. It was joined along with its director, Mr Wynands himself. It is not suggested that they had a key role in the course of conduct that lead to this litigation, although one element of the plaintiffs’ claims related to the bathrooms on which they did work. It seems to me that it is possible that at least part of the reason they were joined may have been a general litigation strategy along the lines described in [11] above. That is especially so in respect of the joinder of Mr Wynands personally. As the authorities indicate, the Court does not usually attempt to assess the merits of the claims made against particular parties.13 I accordingly make no finding that they were joined for this reason. But equally the Court is not able to draw the conclusions that Master Gendall did in Body Corporate 833915, where the Court was able to conclude that the non-contributing party was unfairly benefiting from the settlement whilst claiming costs. The Court held that this was an exceptional case on its own facts.
[13] The presumption in r 15.23 is a strong one. A party who discontinues is obliged to pay the costs of the other party. That starting point can be displaced, but a clear ground for doing so must be put forward. The circumstances put forward here do not displace that presumption in relation to the claim against the Napier City Council.
[14] I nevertheless see the position of the Napier City Council as different from that of the seventh defendant/fifteenth third party. As explained in the affidavit of Mr Greenall, the seventh defendant and fifteenth third party were in a very similar position to the nineteenth and twentieth third parties. Equus Industries Ltd is also a family company that supplied membrane products, and both it and Mr Greenall as its managing director were sued/joined. They did not join the nineteenth and twentieth third parties but filed a cross-claim after they were so joined. The pleading of a cross- claim can be seen as more in the nature of a consequence of the joinder by others. In those circumstances it seems to me that there is a basis to displace the normal rule under r 15.23. It would be unfair for them to pay the costs of the applicants when they participated in the settlement discussions while the applicants did not notwithstanding that they were in a similar position.
13 See the authorities at footnotes 1–8 above.
[15] Accordingly the application for costs is granted as against the Napier City Council but declined in relation to the seventh defendant and fifteenth third party.
[16] The costs set out in paragraph [15] of the submissions on behalf of the applicants appear reasonable. As to the claim for costs for this application, I accept the view of the Napier City Council that no such costs should be awarded. Usually costs would be claimed by way of memorandum rather than interlocutory application, and the decision of the applicants not to participate in the settlement processes raised a legitimate issue under r 15.23 for consideration by the Court. Accordingly the claim for these costs is dismissed.
Cooke J
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