Caisteal an ime Limited v Mount Cass Holdings Limited

[2025] NZHC 2629

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2024-409-000096

[2025] NZHC 2629

UNDER

the Arbitration Act 1996

IN THE MATTER OF

an appeal against an arbitral award

BETWEEN

CAISTEAL AN IME LIMITED

Appellant

AND

MOUNT CASS HOLDINGS LIMITED

Respondent

Hearing:

On the papers

Counsel:

K W Clay for Appellant

J J Gasson for Respondent

Judgment:

10 September 2025

JUDGMENT OF PRESTON J

This judgment was delivered by me on 10 September 2025 at 10.00 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date……………

CAISTEAL AN IME LIMITED v MOUNT CASS HOLDINGS LIMITED [2025] NZHC 2629 [10 September 2025]

Background

[1]                 On 9 June 2025, I gave judgment dismissing Caisteal An Ime Limited’s (Caisteal) application for leave for a second appeal (leave judgment)1 against my judgment dismissing Caisteal’s appeal against an arbitral award in favour of Mount Cass Holdings Limited (Mount Cass) in a lease dispute (initial appeal judgment).2

[2]                 Caisteal and Mount Cass are tenant and landlord respectively, of commercial premises at Akaroa. The arbitral award and subsequent appeals arose under the Deed of Lease (lease) and concerned a disputed clause—cl 11—creating a right of rent review. The underlying circumstances are fully traversed in the initial appeal judgment.

The initial appeal

[3]                 On the initial appeal I found the arbitrator had correctly determined that cl 11 of the lease, which the parties had completed by deleting the market rent provision and entering therein “Nil”, and inserting under the CPI rent review provision the word “Annually”, establishes an annual rent review on the anniversary of the commencement date of the lease.

Costs on the initial appeal

[4]                 I noted 2B costs and disbursements would follow in the ordinary course in the event memoranda were not filed. The successful party, Mount Cass, sought costs in those terms.3 Although the lease contained an indemnity costs provision, at cl 6.1, this was not referred to or relied upon.

[5]                 I determined costs in favour of Mount Cass on a 2B basis including actual and reasonable disbursements as fixed by the registrar.

1      Caisteal An Ime Ltd v Mount Cass Holdings Ltd [2025] NZHC 1494.

2      Caisteal An Ime Ltd v Mount Cass Holdings Ltd [2024] NZHC 3706.

3      By its memorandum of costs and disbursements, filed 17 December 2024.

The application for leave for a second appeal

[6]                 In the leave judgment, I declined leave for a second appeal finding there was no bona fide and serious argument that cl 11 prevented the parties contracting, in the terms found, on the basis that there would be a CPI review annually on the anniversary of the commencement of the lease. I held Caisteal’s arguments for leave essentially replicated the substantive arguments before both the arbitrator and this Court on the initial appeal.

Costs on the application for leave

[7]                 I reserved the question of costs as neither counsel had made submissions as to costs at the hearing. In doing so I noted costs had been awarded in the appeal on a 2B basis,4 and that Mount Cass has the benefit of a solicitor-client costs clause.5

[8]Mount Cass now seeks indemnity costs, pursuant to the lease. Caisteal opposes.

The basis for indemnity costs

[9]Mount Cass relies on cl 6.1 of the lease, which provides:

Costs

.... The Tenant shall pay…the Landlord’s legal costs (as between lawyer and client) of and incidental to the enforcement of the Landlord’s rights remedies and powers under this lease.

[10]             Mount Cass argues there is no basis why indemnity costs should not be awarded. The appellant put the respondent to the costs of an arbitration and two unsuccessful appeals on the basis of a case that was plainly without merit. In particular, Mr Gasson submits, Caisteal failed to identify any question of law on the application for leave but merely reiterated its substantive arguments before the arbitrator and this Court. Counsel supports the claim with invoices relating to work undertaken in preparation and appearance at the hearing.

4      I recorded in the leave judgment that costs (on the original appeal) had been paid, however this was incorrect: I am advised the judgment was not sealed as the appellant did not consent.

5 At [45].

[11]             For Caisteal, Mr Clay submits that notwithstanding that all matters in relation to costs are at the discretion of the Court, nonetheless where the entitlement to indemnity costs under r 14.6(4)(e) is engaged, the approach to costs adopted in the substantive proceedings should be applied to the application for leave to appeal therefrom. It is argued this is in the interests of costs being predictable and expeditious. Caisteal also rejects the suggestion that it failed to identify a question of law or otherwise acted improperly when exercising its rights of appeal.

Discussion

[12]             All matters of costs are at the discretion of the court, pursuant to r 14.1 of the High Court Rules 2016, which relevantly provides:

14.1     Costs at discretion of court

(1)All matters are at the discretion of the court if they relate to costs—

(a)of a proceeding; or

(b)incidental to a proceeding; or

(c)of a step in a proceeding.

(2)Rules 14.2 to 14.10 are subject to subclause (1).

…

[13]I am satisfied indemnity costs should be awarded for the following reasons.

[14]             First, as Caisteal accepts, the respondent is entitled to costs as the successful party and the indemnity clause of the lease applies: entitling Mount Cass to its costs on a solicitor-client basis, being costs “incidental to the enforcement” of the lease.6

[15]             Secondly, there was no categorisation of costs in the proceedings and therefore no basis for the parties to conclude any particular scale costs would apply at any stage of the proceedings, in the absence of special reasons to the contrary.7 Further and in any event, the Court may order an award of indemnity costs despite r 14.3.8  The scheme of

6      High Court Rules 2016, r 14.6(4)(e) and see Synlait Milk Ltd v New Zealand Industrial Park Limited

[2020] NZSC 157, [2020] 1 NZLR 657 at [193].

7      Rule 14.3(2).

8      Rule 14.6(1) and see Black v ASB Bank Ltd [2019] NZCA 384 at [72].

the costs rules thus clearly intends retention of the discretion to make the most appropriate costs order, even where costs have been categorised and ordered in previous proceedings. The Court of Appeal has reiterated that given the obligation to pay indemnity costs is contractual, the court’s discretion is more limited.9

[16]             Thirdly, I accept, as Mr Clay submits, there is no new or aggravating factor present on the application for leave to appeal: Caisteal was entitled to seek leave and it did so expeditiously. However, given the terms of cl 6.1, while Caisteal might have wished that, if unsuccessful, it may be exposed only to a further award of 2B costs it cannot have been unaware of its liability under the lease for indemnity costs.

[17]               I note for completeness I also accept as Mr Clay submits there was no misconduct on the appellant’s part justifying an uplift, but as the learned authors of McGechan on Procedure explain (and is clear from its terms), the entitlement in r 14.6(4)(e) to indemnity costs under a contract or deed is not related to behaviour.10

[18]             Finally and materially, the difference between indemnity costs as sought in the amount of $7,935 and 2B scale costs of $7,050.50,11 is $884.50. The comparison, although not determinative, is a point of reference in the reasonableness assessment.12  I am satisfied the rates claimed are within the reasonable range.

Conclusion

[19]             Weighing all these factors together I am satisfied there is a clear entitlement to indemnity costs as now sought, and that these were reasonably incurred.

[20]             To paraphrase the Court of Appeal in Beecher v Mills, there cannot ordinarily be any room for the exercise of a judicial discretion to order less costs to a contractually indemnified party and thereby erode the contractual protection the indemnity was intended to provide.13 The fact that Mount Cass did not seek indemnity but rather scale

9      Kent Sing Trading Company Ltd v JNJ Holdings Ltd [2019] NZCA 388 at [132].

10     Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR 14.6.03].

11     As Mr Clay helpfully set out in a draft schedule with his submissions.

12     New Zealand New Oak Property Ltd v Eco Earth NZ Ltd [2025] NZHC 1809 at [51].

13     Beecher v Mills [1993] MCLR 19 (CA) at [7]. Upheld in Black v ASB Bank Ltd [2012] NZCA 384 at [78] and Kent Sing Trading Company v JNJ Holdings Ltd [2019] NZCA 388 at [132].

costs on an earlier step in the proceeding does not prevent it here relying upon the terms of the agreement between the parties.

Result

[21]             There is an order for costs and disbursement in favour of Mount Cass in the amount of $7,935.00.

[22]             Costs and disbursements are to be sealed as per the schedule attached to the draft order filed by the respondent on 17 December 2024.14

………………………………………

Preston J

Solicitors:

Layburn Hodgins Ltd, Christchurch Saunders & Co, Christchurch

Copy to counsel:

K W Clay, Barrister, Christchurch

14     Caisteal An Ime Ltd v Mount Cass Holdings Ltd, above n 2.