Brian Green Properties (1971) Limited v Bindon Holdings Limited
[2016] NZHC 2847
•28 November 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2015-412-000121 [2016] NZHC 2847
BETWEEN BRIAN GREEN PROPERTIES (1971)
LIMITED Applicant
AND
BINDON HOLDINGS LIMITED Respondent
CIV-2016-409-000048
BETWEEN BINDON HOLDINGS LIMITED Applicant
ANDBRIAN GREEN PROPERTIES (1971) LIMITED
Respondent
CIV-2016-409-000047
BETWEEN BRIAN GREEN PROPERTIES (1971) LIMITED
Applicant
ANDBINDON HOLDINGS LIMITED Respondent
Hearing: 28 November 2016 (On the papers) Appearances:
J W Maassen for Applicant
J M Moran for RespondentJudgment:
28 November 2016
JUDGMENT OF DUNNINGHAM J RE: COSTS DECISION
[1] This application for costs arises out of three sets of proceedings. These are:
BRIAN GREEN PROPERTIES (1971) LIMITED v BINDON HOLDINGS LIMITED [2016] NZHC 2847 [28 November 2016]
(a) Brian Green Properties (1971) Limited’s (BGPL) application for relief against cancellation (CIV-2015-412-000121);
(b)Bindon Holdings Limited’s (Bindon) application for an order appointing an arbitrator CIV-2016-409-000047); and
(c) Bindon’s application for an order for vacant possession
(CIV-2016-409-000048).
[2] The proceedings arose out of a dispute over the performance of a covenant in a Glasgow lease between Bindon and BGPL.1 Specifically, Bindon alleged that BGPL had not complied with its obligation to keep the improvements on the land in “good and tenantable condition”. While I found there were breaches of the covenant, Bindon was not in any immediate risk of financial loss. The nature and duration of the lease meant that even if the covenant to “keep in good and tenantable
condition” was not fulfilled, Bindon’s only potential loss was when the lease terminated. This was because rent was calculated on the unimproved value of the land and the improvements belonged to the tenant. The landlord might incur the cost of repair or demolition at the end of the lease if one of these options had not been completed by the tenant before then.
[3] In the end, I granted relief against cancellation, albeit on terms, and I
reserved the issue of costs.
[4] The remaining application for an appointment of an arbitrator to determine a rental dispute was resolved between the parties.
[5] Costs on all three applications have not been agreed and the parties have sought a determination from the Court.
1 Brian Green Properties (1971) Ltd v Bindon Holdings Ltd [2016] NZHC 1993.
Submissions
Bindon Holdings Limited
[6] Bindon submits that costs should be paid by BGPL on the basis that, whilst relief against cancellation was granted, this was an indulgence in the circumstances as the litigation had been precipitated by BGPL’s breach of the covenant to repair under the lease. It notes my express finding that there had been a clear breach of the covenant, citing the engineer’s report on the large number of items required to be fixed.
[7] Bindon seek costs on the application and cross application which were heard on 20 July 2016, which, on a 2B basis, it calculates at $15,164 plus disbursements of
$11,030.60. However, it argues that the circumstances support an award of increased costs pursuant to r 14.6 and submits that an award of costs should be made in the sum of $23,000, being an uplift of approximately 50 per cent as compared with scale costs, would be appropriate.
[8] It proposes that costs in respect of BGPL’s proceeding seeking appointment
of an arbitrator in the 047 proceeding should lie where they fall.
Brian Green Properties (1971) Limited
[9] In contrast, BGPL opposes Bindon’s application for costs. It submits instead that costs should be awarded in its favour saying, succinctly, that the concerns of the landlord were rejected in the judgment at [78]-[80] and that to characterise the right to relief described in the Property Law Act 2007, as an indulgence is incorrect. Rather, it is:
Part of the overall balance of interests achieved by Parliament and is an expressly conferred right of access to the Court by Parliament. A landlord must consider all of these matters in deciding the position it will adopt in respect of litigation just as any other litigant must do.
[10] As a consequence, it seeks costs on all three proceedings on the basis that:
(a) High Court r 14.2(a) expects that costs will follow the event, subject to the Court’s discretion, and BGPL succeeded in all three proceedings in obtaining the outcome that it sought; and
(b)costs should be predictable and expeditious and Bindon, by insisting on cancellation as its bottom line, must have known that failure would result in costs.
It seeks costs of $24,907.90, calculated on a 2B basis, and disbursements of
$5,000 as set out in a schedule to its costs memorandum.
Relevant Law
[11] Under r 14.1 of the High Court Rules, all matters relating to costs are at the discretion of the Court. However, such discretion is to be exercised by applying the general principles as set out in r 14.2. Relevant to these proceedings is the principle that the party who fails should pay costs to the party who succeeds,2 and, so far as possible, the determination of costs should be predictable and expeditious.3
Analysis
[12] In Roses are Red Ltd v Board of Administration of the Methodist Church of New Zealand, a case involving an application for relief against forfeiture, the Court of Appeal referred to the legal principles applying to costs as set out above.4 It said, however, that there are some further broad policy considerations applying in such cases, including that where an application for relief against forfeiture is made following a breach of lease, the tenant is seeking an indulgence and may well be in a different position from other “winners”.5 The Court of Appeal also noted that:6
In some cases, it may be self-evident that it was unfair or unreasonable for a landlord unnecessarily to impose the need for a defended hearing and the costs award can reflect that. For example, in Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd HC AK CIV 2005-404-3631 8 March 2006 at
2 High Court Rules, r 14.2(a).
3 Rule 14.2(g).
4 Roses are Red Ltd v Board of Administration of the Methodist Church of New Zealand
[2009] NZCA 237, (2009) 19 PRNZ 369 (CA) at [39].
5 At [40].
6 At [41].
[18], a case relied on by Roses are Red, Asher J suggested that in situations where the landlord was seeking to obtain some sort of commercial or other advantage or was somehow pressuring the tenant so as to improve its position, the usual rule that costs follow the event would apply. In other cases, it may equally be plain that it was fortuitous for the tenant to be granted relief against forfeiture in which case the tenant can expect to pay cost.
[13] In Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd, the case referred to in Roses Are Red Ltd, the defendant was successful in obtaining an order that the plaintiffs grant a renewal of the defendant’s lease.7 Despite the fact that the defendant was in error for not following the proper procedure to renew the lease, Asher J held that the plaintiff would not be prejudiced by the renewal in the sense that they had not entered into any commitments that would cause them loss on the basis of the non-renewal. In referring to the relevant authorities for cost decisions on cases of lease agreement, Asher J observed that:8
[6] In the cases where relief was granted, where appropriate it was ordered that the tenant pay the landlord's costs, even on a solicitor/client basis: Factors (Sundries) Ltd v Miller [1952] 2 All ER 630. Such orders were not always made. Where a forfeiture may have been technically justified, but the landlord had opposed relief unsuccessfully, costs were on occasions ordered against the landlord: Grangeside Properties Ltd v Collingwood Securities Ltd [1964] 1 WLR 139, 144. In Abbey National v Maybeach Ltd [1985] Ch 190, 206, those costs which had been increased by the landlord's opposition to the grant of relief, were ordered to be paid by the landlord.
[14] Furthermore, the Court of Appeal held in Cunningham v Butterfield that:9
In our view the cases on which Mr Johnson relied should not be seen as establishing a general rule that costs will usually be granted in favour of a lessor who has unsuccessfully opposed an application for relief against forfeiture made by a lessee. While we accept that the cases temper the general rule that costs should follow the event, we do not consider that the position can be put on any more definite basis. Rather, what is required in a principled application of the rules. In cases such as this that may require an analysis of the facts to see what has given rise to the litigation, taking into account the conduct of the parties and whether one of them has contributed to its costs or engaged in other conduct that should influence the costs decision.
7 Ponsonby Mall Trust Ltd v New Zealand Food Industries Ltd HC Auckland CIV 2005-404-3631
8 March 2006.
8 At [18].
9 Cunningham v Butterfield [2014] NZCA 213 at [57].
[15] Thus, while the Court of Appeal has previously stated that relief granted to a lessee is an “indulgence”, that has been done in cases where the breach has a serious risk of causing financial loss to the landlord. In the present case, I found there was no immediate risk of loss because of the particular terms of this lease, being a Glasgow lease, where the state of the building was irrelevant to the rental return, and where there was no present risk to that rental return continuing because the tenant was solvent. Furthermore, the tenant had reasonably explained why there was delay in effecting repairs to the building while the rental dispute was resolved. The building could, in any event, have been lawfully demolished by the tenant under the terms of the lease. For these reasons, there was no obvious basis for the tenant needing to re-enter to protect its financial position. What risk I found the landlord was exposed to, was hypothetical and would likely arise only at the expiry of the lease, and in the event of the tenant becoming impecunious. In my view, in those circumstances, the application by Bindon for vacant possession had little prospect of success and it was at risk of an award of costs on that application.
[16] I also do not consider that the grant of relief against cancellation was, in the circumstances of this case, a true “indulgence” which should mean that BGPL should nevertheless meet Bindon’s costs. In the somewhat unusual circumstances of this case, I consider it is appropriate to consider BGPL as the predominantly successful party. The only way Bindon could be said to have had any success was that I accepted there was a future technical risk to Bindon, which could be addressed by provision of security. I propose, therefore, to award costs on a 2B basis plus disbursements to BGPL, but discounted by 25 per cent. That means I accept the costs and disbursements as set out in the schedule to BGPL’s submissions (being costs of $21,631 and disbursement of $3,276.90), but my award discounts those costs by 25 per cent so that the costs award is $16,223.25 and the disbursements award is $2,457.68, making a total award of $18,680.93.
[17] In respect of the proceeding seeking appointment of an arbitrator, that did not proceed to hearing. The application is now redundant because, as Bindon explains, once BGPL had commenced the proceedings seeking relief from cancellation and had confirmed to Bindon that participation in the rental arbitration would not be construed as derogating from Bindon’s position that the lease had been validly
cancelled, the appointment of an arbitrator was agreed and rental arbitration proceeded.
[18] In my view, this is an entirely appropriate case for costs in that proceeding to lie where they fall and so I order.
Amendment of amount ordered in security
[19] At [90] of the judgment dated 25 August 2016, I directed that relief against cancellation was made subject to the condition that if BGPL had not complied with the repair covenant within 24 months of the date of the judgment, it must provide security to Bindon in the sum of $1,549,000 or such other sum as the parties agree or as fixed by the Court.
[20] Bindon seeks revision of that sum, saying it was based on the cost of repair as estimated by Bindon’s quantity surveyor, Mark Geoffrey Burrows, but that assessment was net of GST. It also excluded various other costs as explained, in Mr Burrow’s report. Bindon seeks to have the amount of security revised so that it will include GST, making the total security amount $1,781,350.
[21] I have made a decision on the issue of security and, even if I had jurisdiction to revisit it, I would not be prepared to do so. The sum was not set to represent the exact costs which would be incurred by the landlord if the repairs to the building were still not effected at the expiry of the lease. Rather, it is a sum that has some relationship to those costs, and is sufficiently significant, in my view, to motivate BGPL to ensure the building is either repaired or demolished before expiry of the lease.
[22] The reference to an alternative sum “as fixed by the Court” simply recognised that, either on appeal, or on a fresh application, either party may seek to alter the amount to be provided as security because circumstances have changed. It was not an invitation to reargue the point before me.
[23] I therefore decline to amend the amount for which BGPL must provide security to Bindon.
Solicitors:
Cooper Rapley, Palmerston North
Meares Williams, Christchurch
Wadman Partners, Palmerston North
0
3
0