Dem Home Limited v New Gate Limited

[2023] NZHC 3873

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000604

[2023] NZHC 3873

UNDER

the Companies Act 1993

BETWEEN

DEM HOME LIMITED

Applicant

AND

NEW GATE LIMITED

Respondent

Hearing:

On the papers

Appearances:

K Sun for the Applicant

K Robinson for the Respondent

Judgment:

21 December 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 21 December 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Capstone Law Ltd, Auckland Wynyard Wood, Auckland

DEM HOME LTD v NEW GATE LTD [2023] NZHC 3873 [21 December 2023]

Introduction

[1]                 On 4 October 2023, I dismissed Dem Home Limited’s application to set aside a statutory demand.1

[2]                 I expressed the preliminary view that, having succeeded, New Gate Limited was entitled to 2B costs and its reasonable disbursements, and if the parties could not agree, written submissions should be filed.

[3]                 New Gate  seeks  its  actual  and  reasonable  costs  of  recovery  pursuant  to s 23(2)(a)(ii) of the Construction Contracts Act 2002 (the CCA), of $32,062.70, and disbursements of $1,466.73. Alternatively, if that is not accepted, New Gate seeks scale costs on a 2B basis with a 50 per cent uplift.

[4]                 Dem Home opposes an order for actual and reasonable costs and proposes that costs ought to be fixed on a 2B basis.

Legal principles

[5]                 The principles applicable to costs are well established. The party who fails in a proceeding or an interlocutory application should pay costs to the party who succeeds.2

[6]                 Section 23 of the CCA sets out the consequences of not paying a claimed amount where no payment schedule is provided, as was the case here. Section 23(2)(a) provides that the payee (New Gate) may:

(a)recover from the payer (Dem Home) as a debt due in any court:

(i)the unpaid portion of the claimed amount; and

(ii)the actual and reasonable costs of recovery awarded against the payer by that court.

1      Dem Home Ltd v New Gate Ltd [2023] NZHC 2709.

2      High Court Rules 2016, r 14.2(1)(a).

[7]                 Dem Home submits that a payee is only entitled to recoverable actual costs under s 23(2)(a)(ii) if indemnity costs are awarded against the payer by the court. That is, a payee  is  not  automatically  entitled  to  recover  indemnity  costs  pursuant  to s 23(2)(a)(ii) of the CCA.

[8]                 With respect, that is not how the court have interpreted s 23(2)(a) of the CCA. In Demasol v South Pacific Industrial Ltd, the Court of Appeal said that “[w]hile Demasol is entitled to its actual and reasonable costs, the High Court has previously held that some proportionality is required in determining a payee’s entitlement to costs under s 23(2)(a) of the CCA”. 3

[9]                 My interpretation of this statutory provision is that it creates a presumption that the payee will be awarded their actual legal costs (as opposed to regular scale costs pursuant to the High Court Rules 2016), provided those costs are reasonable (which can involve considerations of proportionality) and subject always to the Court’s discretion.

[10]             I have reviewed the costs claimed by New Gate. The costs are reasonable, and not disproportionate to the amount in dispute of $240,000. The costs reflect a discount of just under 10 per cent. Costs not properly associated with the recovery of the debt have been removed from the final amount claimed.

[11]             Dem Home does not raise any specific objection to the costs claimed. Overall, I am satisfied that the costs are reasonable, and that an award of the actual costs in New Gate’s favour is appropriate.

3      Demasol Ltd v South Pacific Industrial Ltd [2022] NZCA 480; ECTCH Ltd v Dennis & Leo Brady Construction Ltd [2023] NZHC 770; Market Gardeners v McMillan & Lockwood Auckland Ltd [2023] NZHC 2011; and Watts & Hughes Construction Ltd v Complete Siteworks Company Ltd [2014] NZHC 2600.

Result

[12]I order Dem Home Limited to pay New Gate Limited actual costs of

$32,062.70, and disbursements of $1,466.73.

Associate Judge Gardiner