Boyer v McCracken

[2024] NZHC 1444

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-000800

[2024] NZHC 1444

IN THE MATTER OF

the Property Law Act 2007

BETWEEN

ARTHUR JAMES BOYER and NICOLE RUTH KRAMER

Plaintiffs

AND

CLARE McCRACKEN

Defendant

Hearing:	[On the Papers]
Counsel:	R J Hollyman KC and A J Peat for Plaintiffs S A Grant for Defendant
Judgment:	31 May 2024

JUDGMENT OF HINTON J

[Costs]

This judgment was delivered by me on 31 May 2024 at 4.30pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Counsel/Solicitors:

R J Hollyman KC, Auckland

McEntee Barristers and Solicitors, Auckland S A Grant, Auckland

BOYER v McCRACKEN [2024] NZHC 1444 [31 May 2024]

[1]    This application concerns costs following the latest proceeding in a long-running dispute between the parties. By judgment dated 19 March 2024, I ordered that Ms McCracken’s application for orders as to the form of a registrable covenant area only plan be stayed on the basis that the issue was the subject of arbitration.1 I held that the plaintiffs were entitled to costs. The parties have been unable to agree on quantum.

[2]The plaintiffs seek increased costs of $23,033 or alternatively scale costs of

$15,356. They also seek disbursements of $550.

[3]    Ms McCracken submits that increased costs are not justified and that scale costs amount to $7,959.

The law

[4]    Costs are at the discretion of the court.2 The key principles applicable to the determination of costs are set out in r 14.2 of the High Court Rules 2016 and include that the party who fails with respect to a proceeding or interlocutory application should pay costs to the party who succeeds.

[5]Rule 14.6(3) of the High Court Rules provides:

(3)       The court may order a party to pay increased costs if—

…

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

…

(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

…

1      Boyer v McCracken [2024] NZHC 571.

2      High Court Rules 2016, r 14.1(1).

[6]    The party seeking increased costs bears the onus of demonstrating such costs are justified.3 Where increased costs are awarded because a claim lacked merit, it will often be appropriate for increased costs to apply to all steps.4

[7]    Rule 14.6(3)(b) is concerned with improper or unreasonable steps.5 The unreasonable conduct must be in relation to the proceeding and does not include conduct that took place before the proceeding was commenced.6 Increased costs are not intended to be punitive7 and will not be appropriate where there is some reasonable explanation for the defendant’s conduct.8

Scale costs

[8]    Before addressing the claim for increased costs, I must first address the quantification of scale costs.

[9]    I agree with the parties that 2B costs are appropriate for all steps. The proceeding was of average complexity requiring counsel of average skill and experience, (that being no reflection on the actual skill and experience of counsel appearing in this case).

[10]   As set out  above, the plaintiffs submit that 2B costs amount to $15,356.     Ms McCracken submits scale costs are $7,959.

[11]   This difference arises  due  to  the  plaintiffs  claiming  various  steps  that  Ms McCracken disputes are recoverable. Ms McCracken submits:

(a)The plaintiffs have claimed $1,434 for the preparation of a memorandum and appearance that preceded the application for a stay.

3      Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011.

4      NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636; Broadspectrum (New Zealand) Ltd v Nathan

[2017] NZCA 434 at [57].

5      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

6      Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].

7      Wilding v Te Mania Livestock Ltd [2018] NZHC 1506 at [176].

8      Valmar Trustee Ltd v Smart Water Technology [2016] NZHC 1583 at [12].

(b)The plaintiffs have claimed $1,434 for preparing and filing the protest and application for a stay based on an allocation of 0.6 days. This is an overstep and only 0.2 days should be allowed.

(c)The plaintiffs have overstated the time allocations for the filing of two memoranda: 0.4 days for a memorandum filed 21 November 2023 and

0.4 days for a memorandum filed 29 November 2023. The appropriate allocations are 0.2 days for the 21 November 2023 memorandum as it was only 11 paragraphs long and 0.3 days for the 29 November 2023 memorandum as it was only 12 paragraphs long.

(d)The plaintiffs have incorrectly claimed $1,434 for the preparation of a bundle. No common bundle was filed and the bundle prepared by the plaintiffs to support their submissions should be included as part of the claim for preparation of submissions.

(e)The plaintiffs have incorrectly claimed for second counsel and have overstated the length of the hearing as 0.75 days, when the hearing was only 0.5 days.

(f)The plaintiffs are not entitled to $956 claimed for filing reply submissions as these submissions were part of the submissions for the application.

(g)The plaintiffs’ claim for costs on costs ($956) should be disallowed.

[12]   As to (a), the steps claimed are those in relation to a memorandum dated     27 October 2023 and an appearance before the Duty Judge on 2 November 2023. Although these steps occurred before the plaintiffs’ stay application, they took place after Ms McCracken’s commencement of the proceeding on 20 October 2023. These steps are properly recoverable.

[13]   I also consider the plaintiffs have appropriately claimed for the preparation and filing of their protest and application for a stay. There is no issue with the 0.6 days

claimed. That is the allocation allowed by the Rules. Absent any evidence to suggest that the scale costs claimed exceed the actual costs incurred by the plaintiffs, there is no basis to disallow that step. The same is true for the November 2023 memoranda. The Rules allow for a time allocation of 0.4 days for filing a memorandum for a case management conference. There is no basis to reduce this allocation solely due to the length of the memorandum filed. Length of memoranda is not necessarily reflective of the time spent.

[14]   I do however accept Ms McCracken’s submission as to the plaintiffs’ claim for preparation of the bundle. There was no common bundle. Any bundle provided by the plaintiffs accompanied their submissions. The cost for the preparation of that material is covered by the step for the preparation of written submissions.

[15]   Similarly, the claim for appearance of second counsel is disallowed. I do not consider that second counsel was warranted in the circumstances. Although the proceeding has a long procedural history, the issues, arguments and evidence presented in this latest dispute were not complex. Further, the hearing was only half a day. The correct allocation for appearance at the hearing by counsel is therefore only 0.5 days, rather than the 0.75 claimed.

[16]   As to (f), I consider costs of reply submissions are properly recoverable. The plaintiffs’ one-page reply submissions advised the Court of the Arbitrator’s decision. The matter could not have been raised in or before the hearing.9 It is not determinative that the Rules do not allow a specific allocation for the preparation of reply submissions. Item 36 of sch 3 provides that costs may be awarded for steps in a proceeding that are not specifically mentioned in the Rules. A separate allowance is made for these submissions. The plaintiffs have claimed 0.4 days for this step. Given the brevity and content of the submissions I consider only 0.2 days is reasonable.

[17]   Last, I agree with Ms McCracken that the plaintiffs are not entitled to costs on costs. Counsel for the plaintiffs wrote to counsel for Ms McCracken on 22 March

9      Compare Seno Holdings Ltd v Evergreen Homes & Construction Ltd [2023] NZHC 1944 where Associate Judge Paulsen disallowed a separate step for the preparation of reply submissions on the basis that they contained nothing that could not have been raised orally at the hearing.

2024  seeking  $14,651  in  costs.   While  I  agree  with  the  plaintiffs  that  had    Ms McCracken accepted this offer costs on costs would not have been incurred, the figure sought is more than the scale costs properly recoverable. In those circumstances, I do not allow costs on costs.

[18]Taking into account my findings above, scale costs on a 2B basis amount to

$10,994.

[19]I now turn to consider the application for increased costs.

Increased costs

[20]   The  plaintiffs  submit  that  r 14.6(3)(ii)  and  (iii)  is   engaged.   That   is, Ms McCracken:

(a)pursued an argument that lacked merit; and/or

(b)failed without reasonable justification to accept a legal argument.

[21]   They submit that Ms McCracken failed to act reasonably at every step and that their applications for a stay and protest to jurisdiction should never have been necessary. They highlight:

(a)Ms McCracken served her application for orders as to the form of the registrable covenant on 13 November 2023, the day before the arbitration was scheduled to commence. Even after the arbitration commenced, Ms McCracken continued her proceeding.

(b)Ms McCracken’s position before the Court evolved and raised an argument over the language from the 2017 substantive judgment notwithstanding that the orders from that judgment had been sealed in 2023 without objection from Ms McCracken.10

10     Boyer v McCracken [2017] NZHC 775.

[22]   Ms McCracken says it would be “inconsistent with the principles of justice” for increased costs to be awarded in this case. She says her arguments were not unmeritorious, but merely not accepted by the Court. She says this is a normal case of a defendant not succeeding and accordingly there is no basis for increased costs on the basis of unreasonable conduct. She says any delay is not her own doing but rather the result of various delays attributable to the plaintiffs, the Court and the arbitrator.

[23]   Ms McCracken submits that under r 14.7(f) costs should be reduced because of the plaintiffs’ contribution to time or expense by failing to comply with an order or direction of the court. She says the plaintiffs added greatly to delay and expense by not implementing the High Court’s 2017 orders in a timely way.

[24]   I am not persuaded that any departure from scale costs is appropriate in this case.

[25]   The costs regime is premised on the basis that parties succeed and fail. Failure in respect of an application is not sufficient to engage r 14.6(3)(b)(ii). Increased costs are  justified  for  lack   of  merit  only  in  an  obvious  case.11   While  ultimately   Ms McCracken was unsuccessful, I do not consider that her position was so unmeritorious as to meet the threshold justifying increased costs.

[26]   Similarly, the mere fact that Ms McCracken was unsuccessful does not justify increased costs under r 14.6(3)(b)(iii). The ordinary consequence of advancing an unsuccessful claim is an award of scale costs.12 That is the appropriate course here.

[27]   As to Ms McCracken’s submission that r 14.7(f) is engaged, I disagree. The delays in the sealing of the substantive judgment cannot be attributed to one party. In any event, costs on the substantive proceeding and associated steps are a different issue to the costs on Ms McCracken’s application for orders as to the form of the registrable covenant.

11     Gough v Strahl [2014] NZHC 1038 at [23].

12 At [23].

[28]   I am satisfied that costs should be awarded on a 2B basis. The plaintiffs are also entitled to disbursements of $500.

Orders

[29]The plaintiffs are awarded scale costs on a 2B basis of $10,994.

[30]Disbursements of $500 are allowed.

Hinton J