Cardrona Water Supply Limited v Queenstown-Lakes District Council

[2022] NZHC 2770

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2022-425-49

[2022] NZHC 2770

BETWEEN

CARDRONA WATER SUPPLY LIMITED

Applicant

AND

QUEENSTOWN-LAKES DISTRICT COUNCIL

First Respondent

CENTRAL ROAD PROPERTIES LIMITED

Second Respondent

Hearing:

(Dealt with on the papers)

Counsel:

L C R Burkhardt for Applicant

M E Davenport for First Respondent B S Thomson for Second Respondent

Judgment

26 October 2022

JUDGMENT OF EATON J

[As to Costs]

CARDRONA WATER SUPPLY LTD v QUEENSTOWN-LAKES DISTRICT COUNCIL [2022] NZHC 2770

[26 October 2022]

Introduction

[1]    On 29 July 2022, the applicant filed judicial review proceedings challenging a condition (condition 48) to a resource consent granted to the Central Road Properties Ltd (CRP) by the Queenstown Lakes District Council (the Council). The applicant supplies water to CRP. Condition 48 provided that when the Council’s water reticulation service becomes available to the site subject to the resource consent, the owner of the lot must cease using a private water supply system and use the Council’s water supply system.

[2]    Proceedings were served on the Council on 29 July 2022 alleging condition 48 was unlawful. A case management conference was scheduled for 12 September 2022. The Council acknowledged condition 48 did not serve any resource management purpose and agreed to the removal of the condition. Following completion of that process the proceedings were discontinued.

[3]The parties have been unable to agree as to costs.

The application

[4]    The applicant seeks scale costs in respect of the original proceedings, discounted by 25 per cent, on the basis that, notwithstanding the discontinuance, it was successful in the proceedings. The applicant also seeks scale costs for the costs application, it having offered a reasonable solution as to costs to the Council, which the Council rejected.

Submissions

[5]    Ms Burkhardt, for the applicant, acknowledged an issue that might weigh against the applicant securing a costs award is that it did not raise its concerns with the Council before commencing the judicial review proceedings. She contended the applicant had good reasons for not doing so. Mr Gardner-Hopkins, a contract manager for the applicant, explained in an affidavit the previous interactions he had with the Council where he said the Council refused to meaningfully engage with the applicant unless legal proceedings were already afoot.

[6]    Mrs Davenport, for the Council, submitted that costs should lie where they fall. She contended the applicant, through Mr Gardner-Hopkins, had assumed the Council’s position rather than communicate with Council. She submitted the Council might advise that a party seek a judicial review where the Council does not have the statutory power to amend a decision itself, but this was not the case here.

[7]    Mrs Davenport highlighted that having been served on 29 July, by 12 August, the Council had advised the applicant of its decision to facilitate the removal of the offending condition. By 7 September the Council had arranged for the second respondent to apply under s 127 of the Resource Management Act 1991 for a variation of consent to cancel condition 48. That process was completed by 15 September and the proceedings discontinued by order dated 19 September 2022.

Communications between the parties as to costs

[8]    After being encouraged to discuss a resolution as to costs by the Court on    13 September 2022, the parties entered into without prejudice except as to costs discussions  to  attempt  to  resolve  the  costs  dispute.  On  16  September  2022,  Ms Burkhardt proposed that the applicant would not seek costs if the Council provided assurances that the Council would process an application to remove a similar condition relevant to another of its customers. Absent such assurances, Ms Burkhardt said the applicant would still discontinue the judicial review proceedings but would seek costs. Alternatively, the applicant proposed the Council pay $2,500 (around 25 per cent of the scale costs) towards costs.

[9]    On 21 September 2022, Mrs Davenport rejected the applicant’s offer as to costs and proposed that the parties allow costs to lie where they fall.

Discussion

[10]   The default rule for costs  where a proceeding  has  been  discontinued  is  in 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.

[11]   This creates a presumption that an applicant who discontinues proceedings will have to pay costs. This presumption can be displaced where the Court finds there are circumstances which make it just and equitable that it should not apply.1 Such circumstances include where the defendant in the proceeding has implemented a change in policy or otherwise acted such that the proceedings are no longer necessary.2 This is the case here. The Council agreed to a variation of the relevant resource consent so as to remove condition 48. Following that process the applicant appropriately filed a notice of discontinuance. It is therefore just and equitable that the presumption of the costs being paid by the applicant is displaced.

[12]   The question is then whether costs should lie where they fall or whether the applicant is entitled to costs. The only contentious factor that has a bearing on a costs award is that the applicant issued proceedings without taking any steps to resolve the issue informally.

[13]   It is a general principle that a party should attempt to resolve a dispute informally before bringing proceedings. This is frequently done through a “letter before action”.3 The failure to do so may attract a reduction in costs under r 14.7(f)(ii) or increased or indemnity costs under r 14.6(4)(a) of the High Court Rules on the basis that the applicant is pursuing an unnecessary step.

[14]   That the Council resolved to engage in a process to vary the consent so as to remove condition 48 indicates a resolution may well have been resolved by agreement had the lawfulness of the condition been raised in advance of proceedings, on an

1      Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12]; and FM Custodians Ltd v Pati [2012] NZHC 1902 at [10].

2      See Carmel College Auckland Ltd v North Shore City Council HC Auckland CIV-2007-404-5894, 20 January 2009 at [19]; and Earthquake Commission v Whiting [2015] NZCA 144, (2015) PRNZ 411 at [73].

3      Morrell v Solar World Ltd [2018] NZHC 518 at [22]; and Spackman v Moore [2020] NZHC 2148 at [14] and [17].

informal basis. The judicial review proceedings might therefore be described as an unnecessary step in terms of r 14.7(f)(ii).

[15]   The applicant contended that it was reasonable for it to commence proceedings without first sending a “letter before action” because of its past interactions with the Council.

[16]   Mr Gardner-Hopkins, in his affidavit on behalf of the applicant, detailed his past dealings with the Council, through the applicant and through other clients when he was a lawyer. He referred to an interaction a client had where the client wanted to challenge the Council’s decision to grant a resource consent on a non-notified basis. The Council told the client that it considered itself functus officio and was therefore unable to revisit its decision unless proceedings were filed. Upon proceedings being filed, the Council acknowledged the errors in its decisions and the proceedings were withdrawn. Mr Gardner-Hopkins provided another example where the Council only resolved an issue with the same client after “months trying to resolve the impasse” when the client filed proceedings. At that point, the parties agreed within a matter of weeks and the proceedings were discontinued. These events took place against a longstanding experience with the Council generally defending its decisions with significant vigour.

[17]   Mr Gardner-Hopkins also outlined the applicant’s recent dealings with the Council. In December 2020, the applicant, along with the Cardrona Valley Residents and Ratepayers Society Inc and another small water supplier, judicially reviewed the Council’s decision to enter into a developer agreement with Mt Cardrona Station to provide a competing water supply system, which is the subject of the disputed condition to the resource consent in this case. Consistent with Mr Gardner-Hopkins’ previous experience with the Council, the parties were able to find a solution after proceedings were filed. Mr Gardner-Hopkins did not say whether they attempted to find a solution prior to proceedings being filed.

[18]   The applicant was also aware that the Council sought to impose a condition similar to condition 48 on the resource consent of another  client of the applicant.  Mr Gardner-Hopkins says he debated the lawfulness of the condition with the Council.

The Council agreed it was unlawful and said it would not try to impose such a condition again.

[19]   Against that background, Ms Burkhardt submitted it was reasonable when the applicant learnt the same condition had been imposed to simply file the proceedings and then engage with Council.

[20]   There is no doubt that had the applicant unsuccessfully engaged with the Council prior to issuing proceedings, it would be entitled to costs against the Council. However, it did not do so. I consider in the circumstances, even given the “fraught relationship” between the parties set out in Mr Gardner-Hopkins’ affidavit, it would have been both appropriate and sensible to send a letter before action. I am not persuaded that the instances Mr Gardner-Hopkins relies upon to justify the stance taken by the applicant indicate that a letter would have been futile. As Mrs Davenport, has submitted, there will be instances where the Council is unable to assist without proceedings being filed, but there are equally circumstances where proceedings are not necessary.

[21]   I agree the Council acted reasonably and, I find swiftly, after the proceedings were filed. It is notable a notice of opposition was never filed. But there is no dispute condition 48 did not serve any resource management purpose and was therefore unlawful.

[22]   On balance, I do not consider the approach of the applicant to be disqualifying of a costs award. The decision to issue rather than engage informally was not cavalier but it did engage a costs risk.

[23]   In those circumstances, it is appropriate to make a reduced costs award to the applicant under r 14.7(f)(ii). Scale costs in respect of the original proceeding discounted by approximately 75 percent per cent will be awarded. It follows that I consider the Council did reject a reasonable offer of costs (of $2,500) and therefore is entitled to costs for its costs application.4

4      Taranaki-Whanganui Conservation Board v Environmental Protection Authority [2022] NZHC 1813 at [23], citing Booth v Poplar Road Farms Ltd [2019] NZHC 1889 at [25] and North Eastern Investments Ltd v Auckland Council [2018] NZHC 1805 at [20].

Conclusion

[24]I order the Council to pay the following costs:

(a)scale costs in respect of the original proceeding at category 2, discounted by 75 per cent, amounting to $2,868; and

(b)scale costs in respect of the costs application of 0.6 days at category 2, amounting to $1,434.

...................................................

Eaton J

Solicitors:
Pidgeon Judd, Auckland

Copy to:

Lara Burkhardt, Barrister & Solicitor, Mount Maunganui South Mary Davenport, Barrister & Solicitor, Queenstown