DHC Assets Limited v Arnerich

[2022] NZHC 611

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-000975

[2022] NZHC 611

BETWEEN

DHC ASSETS LIMITED

Plaintiff

AND

ANTONY IVO ARNERICH

Defendant

On the papers:

15 December 2021

Counsel:

F Thorp for the Plaintiff

D A Cowan and J McBridge for the Defendant

Judgment:

30 March 2022

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 30 March 2022 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors:

Duthie Whyte, Auckland Doug Cowan, Auckland

F Thorp and L Turner, Auckland
J McBride and A J Steel, Auckland

DHC ASSETS LTD v ARNERICH [2022] NZHC 611 [30 March 2022]

Introduction

[1]        On 2 November 2021, DHC Assets Limited (DHC) filed a notice of discontinuance of this proceeding, reserving its position on costs.

[2]        Antony Ivo Arnerich now seeks his costs on the discontinuance. Specifically, Mr Arnerich claims, relying on rr 15.23 and 14.8(2) of the High Court Rules 2016:

(a)reversal of this Court’s order that he pay costs on his unsuccessful application to strike out this proceeding; and

(b)a costs order in his favour on that strike-out application of $8,745.50.

Legal framework

[3]        Rule 15.23 creates a presumption in favour of awarding costs to a defendant against whom a proceeding has been discontinued:

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.

[4]Rule 14.8 deals with costs on opposed interlocutory applications:

(1)   Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—

(a)  must be fixed in accordance with these rules when the application is determined; and

(b)  become payable when they are fixed.

(2)   Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.

(3)  This rule does not apply to an application for summary judgment. (emphasis added)

[5]McGechan on Procedure notes the rationale for r 14.8:1

The rule reflects the fact that the merits of particular applications and those of the substantive proceedings are different matters: Chapman v Badon Ltd [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].

[6]        Williams J reviewed the authorities relating to r 14.8(2) in Palmerston North City Council v Hardiway Enterprises Ltd.2 He concluded that the rule tends to be used in three circumstances:

(a)When the interlocutory decision is reversed on appeal. Williams J found that most cases under r 14.8(2) involve a party seeking to reverse an adverse costs order in the High Court after successfully appealing the interlocutory decision in the Court of Appeal. Examples include Ngāti Hurungaterangi v Ngāti Wāhiao3 and Wholesale Distributors Ltd v Songle Supermarkets Ltd.4

(b)Where a party failed to mention costs or incorrectly stated the position on costs at the hearing.5

(c)When there was a lack of information before the Court when making the costs award. For example, in Li v Li,6 Muir J reviewed his earlier decision to award costs on a band 2B basis and considered that a modest uplift  would  be  appropriate.  He  varied  his  earlier  order  under     r 14.8(2) because when making the original costs award he was unaware of a potentially unreasonable failure to accept an offer.

1      Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at [HR14.8.04].

2      Palmerston North City Council v Hardiway Enterprises Ltd (struck off) [2018] NZHC 3005 at [6]–[8].

3      Ngāti Hurungaterangi v Ngāti Wāhiao [2018] NZHC 1991.

4      Wholesale Distributors Ltd v Songle Supermarkets Ltd [2015] NZHC 809.

5      Williams J cites Minister of Education v McKee Fehl Constructors Ltd [2018] NZHC 1647, where counsel for the successful party had erroneously advised the Court that it did not seek costs resulting in no order for costs being made. Thomas J declined to review that position under r 14.8, finding that a decision had been made and the Court was functus officio. In so doing, Thomas J referred to a case on r 14.8(2)’s predecessor, Crusaders Meats New Zealand Ltd v New Zealand Meat Board HC Wellington CIV-2002-485-958, 30 September 2003. There, Master Gendall declined to disturb an earlier order that the costs of a partially successful strike-out application should lie where they fall, given the Judge had heard argument and noted that counsel had agreed costs should follow the event.

6      Li v Li [2017] NZHC 2984.

[7]        Williams J noted that r 14.8(2) is not a procedure that enables parties against whom costs are awarded to simply come back for another “bite” at the argument.7

[8]        Palmer J relied on this review of the relevant authorities in Rock Solid Holdings v Simmons (No 2).8 The applicants applied to vary an order for 2B costs made on a successful interlocutory application against Mr Simmons for answers to interrogatories. Palmer J was satisfied that in opposing the application, Mr Simmons filed misleading affidavits and therefore acted improperly and unnecessarily in terms of r 14.6(4)(a). Palmer J did not know this at the time of awarding costs, and found that if he had, he would have awarded indemnity costs rather than 2B costs. Accordingly, under r 14.8(2) he quashed his original order and substituted an order for indemnity costs.

Mr Arnerich’s case for a review of the original costs order

[9]        Mr Arnerich asks the Court to reverse the costs order made against him on his unsuccessful application to have this proceeding struck out, and to make a costs order in his favour, on the basis that the original costs order should not have been made and DHC should have been ordered to pay his costs.

[10]      Mr Arnerich’s reason is, essentially, that the decision to dismiss his application to strike out this proceeding was wrong; and that the Court should have granted the application and struck out the proceeding as an abuse of process. It follows that the costs award against him was wrong.

[11]      Mr Arnerich relies on the judgment of the Court of Appeal, delivered by Goddard J on 3 June 2021,9 in the parallel claim brought against Mr Arnerich by DHC (CIV-2017-404-307 – the 307 proceeding). Mr Arnerich was largely unsuccessful, but the Court of Appeal agreed with both parties that the High Court had jurisdiction to determine all of DHC’s claims, including those “extra” claims that had been referred to arbitration, and it should have done so.

7      Palmerston North City Council v Hardiway Enterprises Ltd (struck off), above n 2, at [9].

8      Rock Solid Holdings v Simmons (No 2) [2021] NZHC 2892 at [9].

9      Arnerich v DHC Assets Ltd [2021] NZCA 225.

[12]Mr Arnerich relies in particular on the following comment by Goddard J:10

However, the Judge erred in declining to determine DHC’s claims for additional payment. The Judge also erred in proceeding on the basis that DHC could bring a further s 301 claim in respect of any additional amounts to which it might be found to be entitled. Quite apart from any limitation issues that might arise in respect of a further s 301 claim, a creditor must bring all its claims under s 301 in one proceeding. It would be an abuse of process to seek to bring successive s 301 claims.

[13]      Mr Arnerich contends that these findings are directly contrary to this Court’s earlier view in the decision on Mr Arnerich’s strike-out application in this proceeding, emphasising the following statement from the judgment:11

However, the s 301 assessment has not been completed by the Court for the TRC claims. His Honour Davison J expressly declined to consider whether an order should be made under s 301, with respect to those claims or for how much. That aspect of the s 301 procedure is not res judicata, nor would it amount to an abuse of process for DHC to make a further application to the Court under s 301 for an order in respect of those claims. Such an application would not constitute the sort of duplicate application that might undermine the principle of finality in litigation, or waste Court resources.

Decision

[14]      I decline  to  exercise  my  discretion  to  reverse  the  costs  order  against  Mr Arnerich on his unsuccessful application to strike out, and to make a costs order in his favour on the terms sought.

[15]      The circumstances of this case do not fall within any of the categories of case where earlier costs orders on interlocutory applications have been reversed on the basis that the  original  order  should  not  have  been  made.  The  decision  dismissing  Mr Arnerich’s interlocutory application to strike out the proceeding has not been reversed on appeal. The judgment stands.

[16]      There is no suggestion that the position regarding costs was not mentioned (to the contrary, the costs order in question was a consent order requested by the parties);12 nor that the Court lacked information when making the costs award.

10 At [180].

11     DHC Assets Ltd v Arnerich [2021] NZHC 277 at [40].

12     Minute dated 1 April 2021 ordering, by consent, that Mr Arnerich pay costs and disbursements to DHC totalling $8,475.

[17]      Furthermore, I am not satisfied that the cost order in question should not have been made. Mr Arnerich’s argument — that it follows from the Court of Appeal’s judgment in the 307 proceeding that the judgment on Mr Arnerich’s strike-out application in this proceeding is wrong — is flawed.

[18]      First, the two courts were deciding different issues, in different proceedings. At [130(a)], the Court of Appeal records the relevant issue raised on appeal as: “Did the High Court err in declining to determine the amount of DHC’s claims against Vaco?” The Court found that the High Court did err by declining to determine DHC’s claims for additional payments on the basis that the Court did not have jurisdiction. The Court of Appeal remitted the proceeding back to the High Court “to determine the question of what, if anything, Vaco owes to DHC over and above the amount determined by the adjudication process, if that issue is relevant to the award of relief under s 301 of the Companies Act in this proceeding”.13

[19]      In contrast, the issue for this Court in this proceeding was: “Is DHC’s proceeding an abuse of process because the cause of action upon which it is based is res judicata?”14 This Court found that the proceeding was not an abuse of process, as the cause of action upon which it was based was not res judicata, because the Court (in the 307 proceeding) had not determined DHC’s claims for additional payments, claims that DHC had submitted to the Court.

[20]      In short, it is not at all clear that the Court of Appeal would have found that DHC’s 975 proceeding was an abuse of process in circumstances where DHC had brought all its claims in the one proceeding (the 307 proceeding) and asked the Court to determine all its claims; but the High Court had (wrongly, according to the Court of Appeal) declined to determine some of them, as the Court (wrongly) considered that it did not have jurisdiction.

[21]      The comment at [40] of the strike-out judgment was concerned only with the claims that DHC had already submitted to the Court, but which Davison J had declined to determine.

13     Arnerich v DHC Assets Ltd [2021] NZCA 225 at [150]–[151].

14     DHC Assets Ltd v Arnerich, above n 10, at [9].

[22]      As Mr Arnerich has not sought any other costs of and incidental to the proceeding, other than those associated with his unsuccessful application to strike out, I make no order for costs.

Associate Judge Gardiner