Glenthorne Station Limited v University of Canterbury

[2024] NZHC 1994

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-70

[2024] NZHC 1994

UNDER

the Arbitration Act 1996

IN THE MATTER OF

an application to set aside arbitral awards

BETWEEN

GLENTHORNE STATION LIMITED

Applicant

AND

UNIVERSITY OF CANTERBURY

Respondent

Hearing:

On the papers

Appearances:

S P Rennie and F H Scrase for Applicant

H R Smith and J W C Nicolle for Respondent

Judgment:

18 July 2024

JUDGMENT OF MANDER J

This judgment was delivered by me on 18 July 2024 at 4 pm pursuant to Rule 11.5 of the High Court Rules 2016

Registrar/Deputy Registrar Date:     .

GLENTHORNE STATION LIMITED v UNIVERSITY OF CANTERBURY [2024] NZHC 1994 [18 July 2024]

[1]    Glenthorne Station Ltd (Glenthorne) and the University of Canterbury (the University) have been involved in a lengthy arbitral dispute over the appropriate level of rent to be paid for a portion of pastoral land owned by the University and leased to Glenthorne.

[2]    On 19 April 2023, Gendall J dismissed Glenthorne’s application to have separate questions decided prior to trial.1 The application concerned whether those separate questions about the release of arbitral awards should be determined independently of substantive applications brought by Glenthorne to set aside those awards and for a grant of leave to appeal those awards.

[3]    In his reserved judgment, Gendall J found that Glenthorne had not discharged the burden upon it to establish this was an appropriate case to order the proposed questions to be decided separately. The Judge reserved costs but encouraged the parties to agree the issue between themselves. They have failed to do so. Gendall J has since retired and the University’s application for an order for costs has been placed before me in my capacity as duty Judge.

[4]    The University seeks costs on a 2B basis in the sum of $9,440.50 and disbursements of $160. Glenthorne opposes that application and argues there are special reasons as to why costs ought to not follow the event in the ordinary way, but should await the determination of its substantive applications.

The interlocutory decision

[5]    Gendall J held the questions proposed for separate determination by Glenthorne largely related to what was claimed to be the unauthorised release of arbitral awards and the decision by, or in the name of, the Arbitration Tribunal (the Tribunal) relating to “procedural issues”.2 It is not necessary to review those matters for the purpose of the costs issue. Essentially, Gendall J’s decision is largely captured in his findings relating to the important question of the interaction between those issues to be addressed at the first trial and those that would be left for a second hearing, and

1      Glenthorne Station Ltd v University of Canterbury [2023] NZHC 849.

2 At [54].

whether  they  were  sufficiently  discrete  to  warrant  being  tried  separately.3    In addressing that question, the Judge made the following findings:

[40] Overall, I am satisfied the proposed separate questions advanced by Glenthorne cannot be determined in a vacuum. Any attempt immediately to set aside the arbitral decision in my view is not appropriate in all the circumstances here. Instead, this Court will need to consider the extent to which any procedural deficiency (if established) might have had an impact on the outcome of the dispute and whether the Tribunal might have reached a different conclusion had it adopted what is suggested to be the correct approach. In my view, here this Court would not be able to determine whether any unauthorised award, assuming it even reaches that view after a full hearing, was consequential or not until a full exploration of all matters is undertaken. This is to include a consideration of all the relevant evidence.

...

[42] For all these reasons, I am satisfied that if Glenthorne’s present application is to succeed, there will be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second. The questions posed here in Glenthorne’s application are not properly discrete. The appropriate course is for this Court to consider all matters raised by Glenthorne in one hearing and where the Court has the benefit of evidence on contested matters.

The University’s costs application

[6]    The University maintains its entitlement to costs as the party which successfully opposed Glenthorne’s application for the determination of separate questions, and that, in accordance with the general rule, costs on an interlocutory application should follow the result.4 It submits Glenthorne’s application was brought to isolate what it considered were procedural questions about the circumstances of the release of provisional arbitral awards from other allegations about bias and discovery, which Glenthorne also believes taint the awards. The University denied there were legitimate procedural objections but, in any event, also opposed the application on the basis the relevant facts relating to the alleged grounds to set aside were too complex and intertwined to be heard and determined separately. Essentially, Gendall J found that was the case.

3      At [22]–[24], citing Hayden v Attorney-General HC Wellington CIV-2010-485-2380, 4 November 2011.

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

[7]    The University submits that Glenthorne had no measure of success on its interlocutory application and there is no reason why costs should not be awarded in its favour, or for costs to be deferred following determination of Glenthorne’s extant applications. It accepts the proceeding should be properly regarded as category 2B but, in light of the complexity of the proceeding, the Court should certify for second counsel. The University also considers it is entitled to a reasonable allowance for preparing a separate bundle as Glenthorne took no steps to circulate a draft index or collaborate on the compilation of a joint bundle. It outlined its efforts to agree costs, with which it persevered until late February of this year.

Glenthorne’s opposition

[8]    Glenthorne argues there are special reasons to diverge from the ordinary step of fixing costs after the event and that any such award should await determination of its substantive applications. These concern an issue of bias that Glenthorne has raised in relation to the arbitrator appointed by the University, Mr Murray. Glenthorne has sought the removal of Mr Murray, but that challenge is yet to be heard and serious issues of conduct are still to be resolved. Glenthorne further argues the University failed to disclose certain documents during the course of the arbitration and that these issues are captured within its application to this Court to set aside the arbitral awards.

[9]    Glenthorne referred in its submissions to a private prosecution it has taken in respect of a defendant (who is not a member of the Tribunal) concerning conduct in relation to the arbitral proceedings. The District Court has permitted charges of perjury or, in the alternative, perverting the course of justice to be filed. The private prosecution is said to relate to the failure to disclose a valuation report that was adverse to the University’s interests.5

[10]   Glenthorne submits this Court will only be in a position to properly assess the merits of the positions taken and representations made by the University on its application for the determination of separate questions once all matters of conduct, bias and disclosure have been heard. It argues that only then can it be determined

5      Glenthorne Station Ltd v M [2023] NZDC 13365.

whether any refusal or reduction of the University’s claimed costs would be justified.6 In the circumstances, therefore, it is submitted there are special reasons for the Court not to follow the usual course of awarding costs to the successful party on the interlocutory application in the normal way.

[11]   In support of that approach, Glenthorne cites Craig v Social Media Consultants Ltd where this Court ordered costs on an interlocutory application to be reserved until after the substantive proceeding.7 In that case, the Court accepted an evaluation of relevant factors which may justify a refusal or reduction in costs could only occur after the merits of the plaintiff’s claim had been heard.8 It was argued the same reasoning applies to the present case.

Applicable principles

[12]   All matters of costs are at the discretion of the Court,9 but that discretion must be exercised in a principled way by reference to the relevant rules.10 The determination of costs, so far as possible, should be both predictable and expeditious.11 Ordinarily, the party that has lost should pay the costs of the party that has won unless there are exceptional reasons to the contrary.12

[13]   In respect of interlocutory applications, r 14.8 provides that costs on interlocutory applications should be treated separately from substantive proceedings and not reserved unless there are special reasons to the contrary:

14.8     Costs on 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.

6      High Court Rules, r 14.7.

7      Craig v Social Media Consultants Ltd [2017] NZHC 1613.

8 At [21].

9      Rule 14.1(1).

10     High Court Rules, pt 14.

11     Rule 14.2(1)(g).

12     Rule 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

(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.

[14]   Rule 14.8 gives effect to the costs principle articulated in r 14.2(1)(a) that the party who fails with respect to a proceeding or interlocutory application is to pay costs to the party who succeeds and that the determination of costs should be predictable and expeditious.13 Costs are usually dealt with separately from the substantive proceeding to reflect the fact that the merits of an interlocutory application may differ from those of the substantive proceeding.14 Costs for interlocutory applications are generally treated as distinct steps in a proceeding for the purposes of determining success in this regard.15

Analysis

[15]   Glenthorne’s position is that special circumstances exist that warrant reserving costs until after their substantive applications have been heard. The statutory test for “special reasons to the contrary” is highly case dependent.16 Circumstances in which the exception has been held to apply include where the parties have consented to costs not being fixed;17 there are outstanding factual matters that bear on costs;18 or where there is the potential for an increase or reduction in costs that can only be sensibly assessed after trial.19 In the present case there are unresolved matters between the parties. These include extant issues concerning the conduct of individual members of the arbitration panel, bias and criminal allegations.

[16]   Glenthorne argues these issues are of such a nature they could result in a refusal or reduction of the University’s costs once the substantive applications are determined.

13     Jessica Gorman (ed) and Others McGechan on Procedure (Online ed, Thomson Reuters) at [HR14.8.01].

14     A v National Standards Committee [202] NZHC 715 at [4], citing Chapman v Badon [2010] NZCA 613, [2010] 20 PRNZ 83 at [12].

15     David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [2.51].

16     David Bullock and Tim Mullins, above n 15, at [2.51].

17     Shanghai Neuhof Trade Co Ltd v Zespri International Ltd [2019] NZHC 617 at [12].

18     Kenealy v Morton-Jones [2015] NZHC 297 at [12]; and Alarm New Zealand Ltd v 15 Hopetoun Ltd [2016] NZHC 2080 at [18].

19     Craig v Social Media Consultants Ltd, above n 7, at [20]; and Wright v Attorney-General [2021] NZHC 2101 at [8].

However, it is not readily apparent how success by Glenthorne on these issues would necessarily result in a refusal or reduction of costs to the University for successfully defending Glenthorne’s interlocutory application for the determination of separate questions.

[17]   Any refusal or reduction in the University’s costs turns on the likelihood of Glenthorne being presently able to demonstrate its success on the substantive proceedings would negate the University’s right to costs as a result of having been successful on the interlocutory proceeding. In Craig, this Court observed that whether a reduction in costs is likely, to some extent, involves an evaluation of the merits of the party’s substantive claim, or at least the merits of the issues at stake.20 In the absence of any reduction of costs being likely, the default position that costs for interlocutory applications should be treated separately and distinctively from the substantive proceedings will prevail.

[18]   I agree with the University’s submission that the merits of the private prosecution do not bear on the question of costs as it relates to Glenthorne’s failed interlocutory application to determine whether questions about the circumstances in which the arbitrators released the awards should be heard separately to other allegations. I understand that none of the arbitrators are the subject of the private prosecution. Glenthorne may seek to rely on the various allegations made in its substantive application to set aside the arbitral awards but I do not consider that fact bears on the present costs matter.

[19]   Gendall J was aware that various claims had been made regarding the disclosure of relevant documents, including a previous valuation report, and allegations of falsification or altered emails that had not been disclosed. Importantly, the allegations that Mr Murray was not impartial and lacked independence were noted to be extant issues sought to be raised before the Tribunal. As noted, Glenthorne may seek to rely on such allegations in its substantive application to set aside the arbitral awards but that has no potential bearing on the merits of the interlocutory application that sought to have separate questions tried, and therefore on the present costs issue.

20     Craig v Social Media Consultants Ltd, above n 7, at [20].

[20]   I proceed on the basis of the recognised rationale for r 14.8, that the merits of interlocutory applications and those of the substantive proceeding are different matters which, except for summary judgment applications, will involve different issues.21 Even if Glenthorne can establish the arbitral awards should be set aside upon the hearing of its substantive applications, such an outcome does not change this Court’s conclusion that it failed on its interlocutory application to discharge the burden on it to establish that the proposed questions should be decided separately from the trial. This is underlined by Gendall J’s core reasoning that the questions sought to be determined were not sufficiently discrete or able to be isolated for separate determination without a full exploration of all matters to which the circumstance of the case gives rise.

[21]   In the absence of the questions posed by Glenthorne being adequately discrete, it was held that difficult demarcation questions arose between those issues proposed to be addressed at a first trial and those that would remain for a second. The appropriate course was for all matters raised by Glenthorne to be considered at the one hearing, where the Court would have the benefit of all the evidence as it related to all the contested matters. Whatever outcome there may ultimately be as a result of the hearing of the substantive applications, it is not apparent how that conclusion on the hearing of the interlocutory application will be affected.

Decision

[22]   It follows that I am not satisfied grounds for the refusal or reduction of costs in relation to the interlocutory application is likely to result as a consequence of the determination of the substantive proceedings. The quantum of costs sought by the University is relatively modest. I consider there is no good reason the general expectation that interlocutory costs should be awarded separately from those of the substantive proceedings should not apply. I do not consider the test for special reasons that may warrant a contrary approach have been met.

21     Chapman v Badon Ltd, above n 14, at [12], cited with approval in Craig v Social Media Consultants Ltd, above n 7, at [13].

Costs order

[23]   There was no opposition to the University’s application for second counsel to be certified, nor for allowance to be made for its preparation of a separate bundle. Accordingly, costs are awarded to the University as the successful party on the interlocutory application, in accordance with the schedule annexed to its submissions of 23 February 2024. An order is made in the sum of $9,440.50 on a 2B basis, and for disbursements of $160.

Release of District Court decision

[24]   As part of its submissions on the question of costs, Glenthorne sought a direction from this Court that the District Court’s decision granting Glenthorne leave to commence a private prosecution be disclosed to the University on the basis it has a general interest in being provided with the judgment. The defendant who is the subject of that criminal proceeding currently has name suppression.

[25]   I accept the University has a valid reason for being provided with the District Court decision.22 However, both the order that the charging documents in that criminal proceeding be accepted for filing by the District Court registry and suppression of the defendant’s name are orders made by that Court. Any application for an exception to the publication prohibition should be directed to it. I note it is not envisaged any difficulty should arise as both parties are in agreement that such disclosure should be made.

Solicitors:

Simpson Grierson, Christchurch Rhodes & Co, Christchurch

22     ASG v Hayne [2017] NZSC 59, [2017] 1 NZLR 777.