Gilpin v Auckland Council

[2018] NZHC 1052

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-1778

[2018] NZHC 1052

IN THE MATTER OF

WESTVIEW MEDICAL CENTRE

BETWEEN

ANTHONY CRAVEN GILPIN ANTONIA CRAVEN GILPIN HELEN JUDITH HODGSON and CLOSEPATCH LIMITED

Plaintiffs

AND

AUCKLAND COUNCIL

First Defendant

MACHARR DEVELOPMENTS LIMITED
Second Defendant

SCOTT INVERARITY (Discontinued) First Third Party

RODERICK McCRAE HARRE
Second Third Party

FAÇADE DESIGN SERVICES LIMITED
Third Third Party

STEPHEN CHRISTOPHER SLOANE

Fourth Third Party

Hearing:

On the papers

Appearances:

T Rea for the Plaintiffs

J Knight/D Barr for the First Defendant

M L Thornton for the Second Defendant/Second Third Party R Anderson for the Third Third Party

Judgment:

15 May 2018

COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL

GILPIN v AUCKLAND COUNCIL [2018] NZHC 1052 [15 May 2018]

This judgment was delivered by me on 15 May 2018 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

[1]                 The second defendant, Macharr Developments Ltd, seeks costs of $31,768 and disbursements of $6,107.69 on the plaintiffs’ discontinuance of their claim against it. Under r 15.23 of the High Court Rules, 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. In Yarrall v Earthquake Commission, the Court of Appeal said:1

Rule 15.23 imposes an obligation on a plaintiff who discontinues a proceeding to pay the defendant’s costs unless the defendant agrees or the Court orders otherwise. This Court has recognised the discretion to order “otherwise” may be exercised where it is “just and equitable”. The onus is on the discontinuing plaintiff to persuade the Court to exercise that discretion. The presumption is not lightly displaced.

[2]                 McGechan on Procedure at HR15.23.01 cites the following principles derived from Kroma Colour Prints Ltd v Tridonicatco NZ Ltd, FM Custodians Ltd v Pati and Opus International Consultants Ltd v Colac Bay Vision Ltd:2

(a)        The rule 15.23 presumption obviates any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.

(b)        Although the rule 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the Court finds that there are circumstances which make it just and equitable that it should not apply.

1      Yarrall v Earthquake Commission [2016] NZCA 517 at [12].

2      J R Wild and others McGechan on Procedure (online loose-leaf ed, Thompson Reuters New Zealand) at HR15.23.01; Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973; FM Custodians Ltd v Pati [2012] NZHC 1902 at [10]–[12]; Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782, [2015] NZCCLR 19 at [20]–[24].

(c)        Although the Court is not limited in the factors it may take into account where considering whether the presumption is displaced, generally:

(i)The Court will not consider the merits of the respective cases, unless they are so obvious that they should influence the cost outcome;

(ii)The Court will consider the reasonableness of the stance of both parties up to the point of discontinuance; whether it was reasonable for the plaintiff to bring and continue the proceeding; and for the defendant to oppose the proceeding. The plaintiff will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful in the proceeding.

(iii)Conduct prior to the commencement of the proceeding may be relevant, for example, conduct by the defendant that precipitated the litigation.

(iv)The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However, it must be clear that the plaintiff would have succeeded had the circumstances (in this case, new legislation) not changed: The Star Trust v Hamilton City Council [2016] NZHC 821 at [10].

(d)        The Court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.

[3]                 The proceeding concerns the Westview Medical Centre in Glen Eden. The plaintiffs are the owners. They had alterations carried out between January and December 2005. Macharr Developments Limited was the building contractor. The plaintiffs alleged that there were defects in the alterations that caused damage and required extensive repairs. In their statement of claim of July 2014 they sued the Auckland Council, as successor to the Waitakere City Council, and Macharr Developments Limited as the building contractor. They claimed damages of

$635,000. In an amended statement of claim of September 2015 the quantum was increased to $796,000. The plaintiffs alleged that the Council and Macharr Developments Limited were liable for the same defects, and claimed the same amounts of damages against them. The council served a cross-claim on Macharr seeking contribution under s 17 of the Law Reform Act 1936. Macharr accordingly faced claims by the plaintiffs and the council for the same amounts for the same damage. The Auckland Council joined third parties, including Mr Haree, the director of Macharr Developments Limited, and sought contribution from them as concurrent tortfeasors.

[4]                  Steps that Macharr Developments Ltd has taken to date include filing statements of defence, making discovery and instructing a consultant to provide reports for a defence.

[5]                 In February 2018 I was advised that the plaintiffs and the council had settled. As part of the settlement the plaintiffs agreed not to pursue any other party for their losses and discontinued against Macharr. Auckland Council, on the other hand, has continued its contribution claims against Macharr and the third parties. The Council has filed a new statement of claim against Macharr seeking contribution up to

$450,000, the amount it paid in settlement of the plaintiffs’ claim. The effect of the plaintiffs’ settlement with the Auckland Council is that the amount of the claim against Macchar Developments Limited has reduced and only the Council is suing it for building defects because the plaintiffs have been removed from the proceeding.

[6]                 In the typical case, a discontinuance against a defendant means that the proceeding ends against that defendant: r 15.21 of the High Court Rules 2016. The presumption in r 15.23 that the plaintiff must pay that defendant’s costs applies in that context. This is not the typical case. Macharr Developments Limited is very much in the proceeding. It is still being pursued for the same alleged liability for defects and damage to the medical centre that it faced at the start of the proceeding. In these circumstances, the plaintiffs’ discontinuance against the second defendant is little more than an adjustment of the parties in the proceeding. Unlike defendants in the typical case, Macharr cannot say that it has been sued in vain, because it cannot say that the proceeding against it is at an end. Nor do I accept that it has been put to unnecessary additional costs and steps in the proceeding. While a detailed examination of the case might show some further effort because it was a defendant at the outset instead of being joined later as a third party (its effective position now), those differences are overall inconsequential and do not warrant any tweaking to my approach here. In short, this case is outside the general run of cases under r 15.23.

[7]                 Awarding costs now to Macharr Developments Limited is tantamount to saying that it has been sued in vain. That would look odd if it is later found at trial that Macharr Developments Limited is liable for contribution. That would entail that it was liable to the plaintiffs. That counts against ordering costs against it.

[8]     The settlement with the Council has benefited Macharr Developments Limited in reducing its exposure from $796,000 to $450,000 (at the most, if proved).

[9]                 In these circumstances, I see no basis for requiring the plaintiffs to pay costs to Macharr Developments Limited when it will remain in the proceeding, and its liability for the damage to the plaintiffs’ building has still to be determined. It cannot claim to have been discharged in the same way as normally occurs on a discontinuance. Costs are accordingly declined.

……………………………….

Associate Judge R M Bell

Solicitors:
Wynn Williams, Christchurch, for the Plaintiffs

Simpson Grierson, Auckland, for the First Defendant

Michael Thornton, Auckland, for the Second Defendant/Second Third Party Kennedys, Auckland, for the Third Third Party.

Counsel:
T Rea, Auckland, for the Plaintiffs