Cubo Projects Limited v S & S Import Solutions Limited

[2020] NZHC 3234

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2020-454-32

[2020] NZHC 3234

UNDER

the Companies Act 1993

BETWEEN

CUBO PROJECTS LIMITED

Plaintiff

AND

S & S IMPORT SOLUTIONS LIMITED

Defendant

Counsel:

S Cowan for plaintiff

T Manktelow for defendant

Judgment:

8 December 2020

COSTS JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[On the papers]

[1]    This case involves, or, rather, involved, a dispute under the Construction Contracts Act 2015. The defendant engaged the plaintiff to carry out construction work. The plaintiff issued payment claims. The defendant paid a proportion of these. It disputed the balance. However, it did not respond with payment schedules. The plaintiff served a statutory demand for the balance. The defendant ignored this. The plaintiff commenced this proceeding seeking a winding up order. Its application was set down to be heard on 20 November 2020. At the outset, it became apparent that the parties wished to resolve the matter and it was settled on the terms set out in my short consent judgment. At the conclusion of that judgment I said that costs would need to be resolved. I had expected that counsel would put their heads together and deal with costs without further court involvement, but nevertheless made directions for the exchange of memoranda. I now have such memoranda.

CUBO PROJECTS LIMITED v S & S IMPORT SOLUTIONS LIMITED [2020] NZHC 3234

[8 December 2020]

[2]    The  plaintiff  invites  the  Court  to  award  indemnity  costs  pursuant   to     s 23(2)(a)(ii) of the Construction Contracts Act or pursuant to r 14.6 of the High Court Rules 2016. If the Court is not prepared to award indemnity costs, then the plaintiff submits that it should have scale costs on a 2B basis with a 50 per cent uplift. The evidence is that the plaintiff’s actual costs total $19,927. Mr Cowan has calculated scale costs on a 2B basis at $11,830.50, so that with a 50 per cent uplift would total

$17,745.75.

[3]    The bases upon which the plaintiff says it is entitled to anything over and above scale costs include:

(a)the Construction Contracts Act incorporates a pay now, argue later basis;

(b)under the Act, once a payment claim is ignored then the party on whom it is served effectively becomes liable for the amount claimed plus costs;

(c)when the plaintiff served a statutory demand, the defendant ignored it;

(d)when the defendant did articulate its defence, the plaintiff through its solicitors explained how the pay now; argue later regime in the Construction Contracts Act operates and put it on notice that it would seek costs on an indemnity basis;

(e)the defendant left it until the eleventh hour to accept its obligation.

[4]    On behalf of the defendant Mr Manktelow acknowledges an entitlement on the plaintiff’s part to an award of costs. However he submits that the case was very straightforward and invites the Court to consider awarding costs on a 1A (as opposed to a 2B) basis. He submits that there was a very modest amount of money involved (just over $9,000), that it was the type of case that might have been handled by junior counsel, and he correctly points out that the matter was resolved without the need for a hearing.

[5]    The plaintiff is justified in criticising the defendant, in particular its somewhat cavalier approach to the payment claims and the statutory demand. This forced the plaintiff to take the steps that it did and incur costs. Furthermore, the defendant did not acknowledge the plaintiff’s entitlement to the outstanding amount claimed until the hearing. Having said that, there is also something in what Mr Manktelow says about the straightforward nature of the proceeding.

[6]    The principles contained in the High Court Rules are uncomplicated and well known. Whilst costs are always a matter for the Court’s discretion, the successful party is generally entitled to a costs award unless there is disentitling behaviour of some sort. That is not suggested here. As to quantum, invariably costs are awarded according to scale.

[7]    On its face, s 23(2)(a)(ii) of the Construction Contracts Act cuts across those principles, but the entitlement, if that is the correct term, is to “actual and reasonable costs”,  and  the  requirement  of  reasonableness  engages  the  points  made  by    Mr Manktelow as to the scale of the proceeding and the way it was ultimately disposed of.

[8]    In the end, my view is that a costs award based on a 2B scale is appropriate. Accordingly, I order that the defendant is to pay to the plaintiff costs in the sum of

$11,830.50 together with disbursements in the sum of $1,872.96.

Associate Judge Johnston

Solicitors:

Cavell Leitch Ltd, Christchurch for plaintiff

Innes Dean Tararua Law, Palmerston North for defendant