Christian Church Community Trust v Bank of New Zealand

[2023] NZHC 3038

IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE

CIV-2022-418-16

[2023] NZHC 3038

UNDER

The High Court Rules 2016

IN THE MATTER OF

An interlocutory application for interim injunction

BETWEEN

THE CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS

Applicants

AND

BANK OF NEW ZEALAND

Respondent

Hearing:	30 May 2023
Appearances:	R W Raymond KC, A V Foote and C M G Sykes for Applicants W M Irving and L M Dick for Respondent
Judgment on Costs:	31 October 2023

JUDGMENT OF CULL J

[On Costs]

Introduction

[1]    By judgment dated 8 September I upheld the applicants’ application for the continuation of an interim injunction preventing the respondent from terminating the bank accounts of the applicants’ entities pending the final determination at a substantive hearing.1 I found that there was a serious question to be tried on the applicants’ first cause of action, as to whether BNZ acted in breach of its contract with the applicants when they sought to unilaterally terminate the contract on reasonable

1      Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523.

CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [Costs] [2023] NZHC 3038 [31 October 2023]

notice. I held that it is seriously arguable that BNZ does not have an express unilateral power of termination, and that either the default rule,2 or the Braganza extension applies,3 requiring the respondent not to exercise its contractual discretion in a way that is arbitrary, capricious, or that there is an implied term in the contract to act reasonably. If the respondent is required to act reasonably, there is a serious issue as to whether BNZ’s termination decision was reasonable, procedurally, and/or substantively, and whether there is a public obligation on the respondent as an essential service provider to provide minimum banking services to customers without alternative options. The balance of convenience and overall justice of the case, in my view, clearly favoured the applicants.

[2]The parties were unable to agree on costs and memoranda have been filed.

The parties’ positions

[3]    The applicants seek costs plus disbursements, calculated on a 2C basis for steps taken up to 1 May 2023, and indemnity costs from 1 May 2023 being the date the applicants wrote to the respondent proposing a settlement discussion.

[4]    The respondent is prepared to accept that the applicant is entitled to costs on a 2C basis, subject to some minor amendments to the applicants’ cost schedule, with which I deal below. The respondent submits that indemnity costs are not warranted as the respondent cannot be regarded as having acted vexatiously, frivolously, improperly in opposing the application for the interim injunction, preventing its ability to close the accounts.

[5]I deal with the disputed steps and the claim for indemnity costs in turn.

2      The common law principles applying to an exercise of a contractual discretion, which requires that it may not be exercised in a way that is arbitrary, capricious, or unreasonable having regard to the provisions of the contract. See Canaan Farming Dairy Ltd v Westland Dairy Company Ltd [2022] NZHC 2524 at [115]—[122] recently considered in Woolley v Fonterra Co-operative Group [2023] NZCA 266.

3      Braganza v BP Shipping Ltd and another [2015] UKSC 17, [2015] 1 WLR 1661, neither expressly endorsed or rejected in Woolley v Fonterra Co-operative Group Ltd, above n 2, at [103] and [112]– [115].

Disputed steps

[6]The respondent disputes two aspects of the applicant’s costs schedule.

[7]    First, the applicants claim for one day for second and subsequent counsel if allowed by the Court. The respondent is prepared to accept costs for both principal and second counsel, but states that the appropriate allocation for second counsel is 50% of the allocation for principal counsel, in accordance with step 27 of sch 3 to the High Court Rules 2016. I uphold the respondent‘s submission, that there is no apparent justification for departing from this rule. The time allocation for second counsel should be 0.5 days.

[8]    Second, the respondent submits that the provision for step 12, appearance at a mentions hearing, in respect of the interlocutory application should be removed. The application before Dunningham J on 29 November 2022 was without notice, although served on a Pickwick basis. Counsel were still required to attend and address the need for the application and its urgency. Costs are appropriate in that circumstance.

Indemnity costs

[9]    The applicants seek indemnity costs from 1 May 2023 under r 14.6 of the Rules, primarily on the grounds that the applicants wrote to the respondent on 1 May 2023 proposing settlement discussions. They say their offer was improperly rejected by BNZ. The applicants contend that r 14.10 is engaged, which relates to Calderbank offers.

[10]   The applicants also contend that BNZ’s conduct put the applicants to unnecessary cost in the proceeding, by:

(a)Relying on erroneous material in making its decision to close the applicants’ accounts, including a Wikipedia entry;

(b)Declining to reconsider its position even on receipt of the applicants’ evidence;

(c)Declining to provide the decision making material to the applicants until after the application had been filed –– a substantial affidavit in response, dealing with each factual inaccuracy had to be filed; and

(d)Refusing to extend the closure date on 23 November 2022, and unreasonably refusing a request by the applicants on 28 November 2022 that they be given until 2 December 2022 to file an application for relief, putting the applicants to the additional cost of the urgent application before Dunningham J on 29 November 2022.

[11]   BNZ submits that the applicants merely requested a meeting to discuss a resolution to the substantive proceeding in their letter of 1 May 2023, and at no stage made any offer that would fall within r 14.10. The written communication was not marked “without prejudice save as to costs” as required by r 14.10(1)(a) and it did not put forward any offer to resolve the interlocutory application. Further, BNZ says the applicants have not shown that it was unreasonable for the respondent to reject their offer to commence settlement discussions, so as to fall within r 14.6(3)(b)(v).

[12]   It appears the applicants requested a meeting in relation to the resolution of the substantive proceeding not a proposal to resolve the interlocutory application. BNZ suggests as the applicants did not propose an interlocutory resolution, for example, in exchange for an agreement that the substantive proceeding move quickly towards trial, the applicants’ offer is irrelevant to the Court’s determination of costs on the interim injunction.

[13]   Costs are ultimately at the discretion of the Court.4 As a number of recent judgments of this Court have addressed, it is becoming increasingly common for parties to litigation to seek an uplift of the standard scale costs.5 Such uplifts are only warranted when there is a clear basis for such a departure and should otherwise be discouraged. The costs regime should be “predictable and expeditious”6, thus, the

4      High Court Rules 2016, r 14.8; guiding principles contained in r 14.2 — these principles apply to both substantive proceedings and interlocutory applications.

5      Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [7]; Spring v Browne

[2023] NZHC 2581 at [7]-[8]; Lepionka & Company Investments v Sheat [2023] NZHC 2745 at

[3] and [7].

6      Rule 14.2.(1)(g).

standard scale for costs provided for in the High Court Rules 2016 applies by default.7 The Court should only be involved in determining costs in limited circumstances – not the majority of cases or in the usual course.8

[14]   A departure from scale costs to award indemnity costs, should only occur in truly exceptional circumstances.9 Rule 14.6(4) sets out such circumstances which may justify an award of indemnity costs, illustrating the high threshold, such as where a party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding.10

[15]   As I have held, these proceedings involve a serious question to be tried. I consider that it was not improper or unnecessary for the BNZ to maintain its position in respect of the interim injunction. It did not do so, for example, in wilful disregard of known facts or clearly established law, nor were its principal arguments in defence without merit.11 There is a serious issue as to the law applicable to the circumstances, namely whether or not the common law principle that BNZ was entitled to exercise its contractual discretion in the way it did, or whether the common law default rule, or the Braganza extension applied in the circumstances.

[16]   In relation to the allegations about the BNZ submissions, the reliability of the factual foundation for the BNZ’s decision remains to be tested at a substantive hearing. The BNZ’s refusal to accommodate the applicants’ request and the need for the interim injunction underplay the serious questions to be tried. Whether the BNZ’s position was reasonable, fair or tenable, remains to be determined. It does not justify indemnity costs.

[17]   The applicants have not discharged their onus to persuade the Court that an award of indemnity costs is justified.

7      See Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]—[48] for a summary on the schedular approach to costs.

8      Lepionka & Company Investments v Sheat, above n 5, at [7].

9      Hedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 at [8].

10     Rule 14.6(4)(a).

11     Rule 14.6(3)(b)(ii), see for example, Powell v Hally Labels Ltd [2015] NZCA 11 at [4]-[5].

Result

[18]   The applicants are awarded costs in accordance with the above, on a 2C basis, being $18,903 (inclusive of disbursements).

Cull J

Solicitors:

Duncan Cotterill, Christchurch, for Applicants Russell McVeagh, Auckland, for Respondents