Building Brilliant NZ Limited v Star Field Holdings Limited

[2023] NZHC 1857

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-529

[2023] NZHC 1857

BETWEEN

BUILDING BRILLIANT NZ LIMITED

Applicant

AND

STAR FIELD HOLDINGS LIMITED

Respondent

Hearing:	15 June 2023
Appearances:	Sophie L L Gallagher for the Applicant Gary J Warren for the Respondent
Judgment:	18 July 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 18 July 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Righteous Law (C L Holland/Sophie L L Gallagher), GreenLane, Auckland, for the Applicant PCW Law, Remuera, Auckland, for the Respondent

Copy for:

Gary J Warren, Greenlane, Auckland, for the Respondent

BUILDING BRILLIANT NZ LIMITED v STAR FIELD HOLDINGS LIMITED [2023] NZHC 1857 [18 July 2023]

`

[1]                 This matter was called before the Court on 15 June 2023. At that hearing, the applicant’s application to set aside the respondent’s statutory demand was withdrawn with leave of the Court, and costs were reserved. Each of the parties was directed to file a memorandum as to costs within five working days of the date of the hearing, and a decision as to costs would then be made on the papers.

[2]                 Counsel for the respondent filed a memorandum dated 21 June 2023, and counsel for the applicant filed a memorandum in response, dated 22 June 2023.

Respondent’s submissions

[3]                 Counsel for the respondent submits that the respondent should be entitled to indemnity costs for all steps in the proceedings from 4 May 2023 onwards on the basis that:

(a)the applicant’s proceeding to set aside the statutory demand are flawed and an abuse of process;

(b)the applicant disputed the amount claimed, and sought to exploit it;

(c)the applicant, by way of a Part 14 compromise, has subsequently confirmed the amount claimed in the statutory demand is undisputed;

(d)the applicant has taken steps to repay the amount demanded;

(e)it has always been open to the applicant to discontinue the proceedings since 4 May 2023;

(f)an order for indemnity costs for the steps taken since 4 May 2023 meets the interests of justice.

[4]                 Mr Warren submits that the respondent should be entitled to indemnity costs from 4 May 2023 onwards as the applicant continued the proceedings after the formal compromise agreement was reached on 3 May 2023 and failed to inform the Court of the agreed compromise, or file a notice of discontinuance. He submits the statutory demand was not an abuse of process as it was issued for a liquidated sum that was unchallenged by the applicant and was issued in good faith. As the applicant withdrew the application to set aside the statutory demand, the respondent was not unsuccessful in the proceedings.

[5]                 Mr Warren refers to the decision in Nags Head Horse Hotel Ltd v Epsom Woods Ltd1 which he submits was an example of a case where there are indications the statutory demand was not issued for a proper purpose, there was an underlying flaw in the respondent’s opposition to the setting aside of the statutory demand, and the respondent’s position changed during the proceedings, resulting in the Court ordering that indemnity costs should be paid. Mr Warren submits there are similarities between the present case and the Nags Head case in that there is a serious doubt that the application to set aside the statutory demand was made for a proper purpose and there was an underlying flaw in the applicant’s position, sufficient enough for it to change its position during the course of the proceedings. He submits the application went from seeking to set aside the statutory demand, to a position where it was agreed the statutory demand was undisputed and due, and taking steps to reach a compromise with the respondent.

[6]                 Mr Warren further submits that the applicant has demonstrated that the statutory demand was for a liquidated undisputed sum by the compromise arrangement agreeing to pay $75,000 in cash and signing a General Security Agreement over the applicant’s present and future goods to secure the remainder of the demanded amount.

[7]Mr Warren also submits that indemnity costs are claimed on the grounds that:

(a)the applicant acted vexatiously, unnecessarily and improperly in

continuing a step in the proceeding;

1      Nags Head Horse Hotel Ltd v Epsom Woods Ltd [2020] NZHC 2973.]

(b)clause 28 of the Master Builder’s contract allows recovery of full solicitors/client costs.

[8]                 The respondent therefore seeks indemnity costs, or alternatively costs on a 2B scale with a 25 per cent uplift. The respondent also seeks an order that the amount of

$143,228.50 (being the amount listed in the General Security document), be declared as a liquidated sum due and owing under the contract.

Applicant’s submissions

[9]                 Ms Holland, for the applicant, submits that costs should lie where they fall. Ms Holland submits that the applicant has not acted vexatiously, unnecessarily or improperly in continuing the step in the proceedings.

[10]As to the settlement agreed between the parties, Ms Holland submits that:

(a)while a settlement meeting occurred on 3 May 2023 when there were settlement discussions between the parties, a full and final settlement agreement was not entered into and it was only the intentions of the parties were agreed upon and recorded in an email. The respondent had not withdrawn its statutory demand after those settlement discussions;

(b)there was no finality to the settlement in early May 2023 as the finality of the settlement rested on the condition of the deed of acknowledgment being drafted and signed. The deed of acknowledgment was provided by the respondent to counsel for the applicant on 4 May 2023 but was not signed. Ms Holland therefore submits that the parties could not have understood the terms of the agreement on 3 May 2023 to be a full and final settlement;

(c)there may have been some miscommunication or confusion, but it does not lead to the conclusion of ill-intention from either side nor any deliberate actions to abuse the process, act vexatiously, unnecessarily or improperly in continuing the step in the proceedings;

(d)against such a background, it would be inappropriate and not in the applicant’s best interests to withdraw the application without instructions based on the parties’ intention to enter into the terms of the agreement on 3 May 2023.

[11]             As to the respondent’s contention that indemnity costs are recoverable under cl 128 of the Building Contract, Ms Holland submits that cl 128 is not applicable in the current situation as the current proceedings were focused on setting aside a statutory demand and the invoices as being in dispute. She submits that the current proceeding was not one of costs recovery that is due and payable, rather, it was issued as one of the disputed invoices and the amount not due and payable.

Decision

[12]             In my view there are issues on both sides of this matter. The following factors need to be balanced:

(a)The amount claimed in the statutory demand has ultimately been acknowledged by the applicant to be an undisputed amount as evidenced in the settlement agreement.

(b)The respondent did not file a notice of opposition to the application despite being granted an extension of time to do so to 28 April 2023, and did not appear when the matter was called before the Court on   28 April 2023.

(c)There was a lack of clarity around when the full and final settlement arrangement was agreed between the parties. Ms Holland points to the fact that there was a deed of acknowledgment was prepared and sent to the applicant’s counsel on 4 May 2023, but not signed. However, at some point in early May 2023 the applicant made a payment to the respondent pursuant to the settlement arrangement, and also entered into the General Security Agreement to secure the balance of the amount outstanding. These steps indicate that under the doctrine of

part-performance, that the settlement agreement was effectively in place, notwithstanding the deed of acknowledgment was not signed.

(d)I accept Ms Holland’s submission that cl 128 of the Building Contract is not applicable to entitle the respondent to indemnity costs.

[13]             While Mr Warren has relied on the Nags Head decision2 as a basis on which the Court should award indemnity costs against the applicant, I am of the view that the applicant’s actions in seeking to set aside the statutory demand and continuing to take steps in the proceeding after the 3 May 2023 settlement discussions are not sufficiently unreasonable, vexatious or unnecessary to warrant awarding indemnity costs, or indeed any costs, against the applicant.

[14]             Weighing up the factors set out at paragraph [12], I am of the view that costs should lie where the fall.

[15]With respect to the orders sought by the respondent, that the amount of

$143,228.50 (being the amount stated as secured by the General Security Agreement executed by the applicant) be declared as a liquidated sum due and owing under the contract, this order is not made, as it is not appropriate for such declaration being made in these proceedings and is a matter to be left to the settlement agreement between the parties.

Orders

[16]I order that the parties’ costs lie where they fall.

…………………………….. Associate Judge Taylor

2      Above, n 1.