Forest Holdings Limited v Mangatu Blocks Incorporation

[2018] NZHC 1782

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2016-470-000158

[2018] NZHC 1782

BETWEEN

FOREST HOLDINGS LIMITED

Applicant

AND

MANGATU BLOCKS INCORPORATION

Respondent

Hearing:

On the papers

Counsel:

M D Branch for the Applicant

Z G Kennedy and M D Toulmin for the Respondent

Judgment:

18 July 2018

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Wednesday, 18 July 2018 at 4:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Harkness Henry, Hamilton

Minter Ellison Rudd Watts, Auckland

FOREST HOLDINGS LIMITED v MANGATU BLOCKS INCORPORATION [2018] NZHC 1782 [18 July 2018]

[1]    These proceedings are part of a long running claim by Forest Holdings Limited (Forest Holdings) against Mangatu Blocks Incorporation (Mangatu) in respect of the wrongful termination of a forestry right Mangatu had granted in favour of Forest Holdings.

[2]    The claim came to the High Court by way of an application by Forest Holdings for leave to appeal against a damages award made by an arbitrator, Hon BJ Paterson QC, on 29 July 2016 in which he found that “The prospect of [Forest Holdings] obtaining other than a nominal damages award on its capital loss claim appear to be minimal.”

[3]    Heath J granted leave to appeal in a judgment dated 14 November 2016. He then heard the appeal on 13 December 2016 and in a judgment dated 15 March 2017, allowed the appeal and set aside the damages award made by the arbitrator. Mangatu then applied for leave to appeal Heath J’s decision to the Court of Appeal. In a judgment dated 31 May 2017, Heath J refused Mangatu leave to appeal to the Court of Appeal.

[4]    Heath J has now retired. The proceedings have been referred to me to determine the issue of costs in the High Court. Mangatu submits that it is entitled to costs on a 2B basis for the three High Court hearings. It also submits that it is appropriate in all the circumstances that this court make non-party costs orders against Forest Holdings’ sole director and effective sole shareholder, Mr Roderick Scott.

[5]    Mangatu notes that Heath J expressly reserved costs so as not to foreclose an argument for Mangatu that “[Forest Holdings] appellate exercise had been pointless” and submits that Forest Holdings’ appeal was, in fact, pointless because in a subsequent ruling on damages dated 7 March 2018, the arbitrator reached the same conclusion as in the damages award set aside by Heath J namely, “It is therefore determined that in respect of its loss of chance claim FHL cannot recover more than nominal damages”.

[6]    On the other hand, Forest Holdings submits that it is entitled to costs on a 2B basis for the three High Court hearings. It also submits there is simply no basis for a non-party costs order against Mr Scott.

[7]    Forest Holdings submits that Heath J was wrong to reserve costs. It further submits that whether the application was pointless cannot in fact be determined until Forest Holdings’ intended application for leave to appeal the latest decision of the arbitrator has been heard and finally determined and in all likelihood until the arbitration is concluded.

Discussion

[8]    I am of the view that the general costs principles dictate the result in the present case. First, the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.1 (“Costs follow the event”). Proceeding is defined as meaning any application to the court for the exercise of the civil jurisdiction of the court, other than an interlocutory application. An interlocutory application is in turn defined as meaning an application made in accordance with r

7.19 or r 7.41 of the High Court Rules 2016.

[9]    The arbitration before Hon BJ Paterson QC is neither a proceeding nor an interlocutory application and, accordingly, the outcome of the arbitration should not, except in exceptional circumstances, be determinative of costs of a High Court proceeding or interlocutory application.

[10]   Second, the determination of costs should be predictable and expeditious.2 Costs are not predictable or expeditious if they depend on the outcome of a claim outside of the court’s processes.

[11]   Third, costs on an opposed interlocutory application, unless there are special reasons to the contrary, must be fixed in accordance with the High Court Rules when the application is determined and become payable when they are fixed.3

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

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

3      High Court Rules 2016, r 14.8(1).

[12]   I am of the view that the fact the arbitrator reached the same conclusion when the matter was referred back to him by Heath J is not determinative of the costs application in the High Court. In criminal proceedings, a conviction may be quashed by the Court of Appeal, but on retrial the decisionmaker, whether it be judge or jury, may again find the appellant guilty and the court may also enter a conviction once again. That does not mean that the appeal was pointless. It is vitally important to get the process right because due process is the key to justice.

[13]   There is no doubt that Forest Holdings succeeded in respect of all three hearings in the High Court. Mangatu failed. There is no principled basis on which costs could be awarded in favour of a losing party. The arbitration also continues. Forest Holdings has apparently instructed its solicitors to appeal the subsequent ruling on damages dated 7 March 2018.

[14]   I am, therefore, of the view that costs are properly payable by Mangatu to Forest Holdings. In those circumstances, I do not need to consider the claim for costs against Mr Scott.

[15]   Forest Holdings has itemised its costs on a 2B basis. Issue was taken by Mangatu to two items listed by Forest Holdings. I agree with both objections and I have made adjustments accordingly.

[16]   Mangatu is to pay the following sums to Forest Holdings in respect of the three hearings in the High Court.

Item	Description				Time allocation	Total
Forest Holdings’ leave application
22	Filing interlocutory application on notice for leave to appeal under Arbitration Act 1996				2	$4,460.00
11	Filing joint memorandum of counsel for telephone conference scheduled 1 November 2016				0.4	$892.00
12	Appearance    at 1 November 2016	telephone	conference	on	0.3	$669.00
40	Preparation of written submissions				1.5	$3,345.00
41	Applicant’s bundle of authorities				0.6	$1,338.00
42	Appearance at hearing				0.25	$557.50
5.05	$11,261.50

Forest Holdings’ appeal
56	Preparation of written submissions					3	$6,690.00
55	Preparation of case on appeal – applicant’s bundle of key documents					1	$2,230.00
57	Appearance at hearing on 13 December 2016					0.5	$1,115.00
11	Filing memorandum of applicant in response to minute dated 8 March 2017					0.2	$446.00
4.7	$10,481.00
Mangatu’s application for leave to appeal to Court of Appeal
11	Memorandum of counsel for applicant for teleconference on 28 April 2017					0.4	$892.00
13	Appearance 28 April 2017	at	telephone	conference	on	0.3	$669.00
23	Notice of opposition to interlocutory application for leave to appeal to the Court of Appeal					0.6	$1,338.00
11	Filing memorandum as to summary of issues					0.4	$892.00
13	Appearance  at  telephone  conference   on   16 May 2017 – dismissing Mangatu’s application to adduce further evidence					0.3	$669.00
24	Preparation of written submissions					1.5	$3,345.00
26	Appearance at hearing of defended application					0.25	$557.50
Total					3.75	$8,362.50
Grand Total (three applications)					13.5	$30,105.00
Disbursements
Filing Fee – leave to appeal						$540.00
Filing Fee – notice of opposition to Mangatu’s application for leave to appeal to the Court of Appeal.						$110.00
Total						$650.00

Woolford J