Graham v Scott

[2012] NZHC 2834

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2012-485-1722 [2012] NZHC 2834

BETWEEN  TONY GEORGE GRAHAM and ELMSLIE ESTATE LIMITED Appellants

ANDGAVIN ROBERT SCOTT and PATRICK ROBIN VAN BERKEL

Respondents

Hearing:         25 October 2012

Counsel:         P W Michalik for the Appellants

Respondents in person

Judgment:      26 October 2012

JUDGMENT OF MALLON J

Contents

Introduction ....................................................................................................................................... [1] The background ................................................................................................................................ [2] The proceedings ................................................................................................................................. [6] The settlement...................................................................................................................................[11] Exemplary damages ........................................................................................................................ [13] Costs ................................................................................................................................................. [32]

Result ................................................................................................................................................ [41]

GRAHAM v SCOTT HC WN CIV 2012-485-1722 [26 October 2012]

Introduction

[1]      Mr Graham/Elmslie Estate  Ltd  appeals  against  a District  Court  judgment awarding exemplary damages to Mr Scott in the sum of $5,000 and ordering costs in Mr Scott  and  Mr van  Berkel’s  favour  on  a  2B  basis  (amounting  to  $13,842.55 including disbursements). The appeal is on the basis that:

(a)       No claim for exemplary damages was pleaded nor addressed in the

parties’ submissions to the District Court; and

(b)In  awarding  costs,  the  District  Court  Judge  erred  in  taking  into account conduct that did not relate to the conduct of the proceeding, that he was wrong on a factual matter, and that he should have taken into account that Mr Graham/Elmslie Estate Ltd was the successful party.

The background

[2]      The proceeding involves a dispute between neighbours.  Elmslie Estate Ltd, of which Mr Graham is the principal, owns an undeveloped section in Upper Hutt. Mr van Berkel and Mr Scott own and live on developed neighbouring properties. They each enjoy the benefit of a right of way over the land owned by Elmslie Estate Ltd.  That right of way was obtained at a time when the Elmslie Estate land was in the  possession  of  the  mortgagee  following  financial  difficulties  experienced  by Mr Graham.  Mr Graham later settled with the mortgagee and regained possession. He has never been happy with the right of way arrangements that were negotiated in his absence.

[3]      Later Mr Graham wished to develop his property.  He began felling trees in preparation for a possible subdivision.   He also approached Mr Scott and Mr van Berkel for consent.  They refused to provide that consent.  Mr Graham saw this as unfair when they had enjoyed living in their houses with the benefit of access over

his land.  He then went on the offensive in taking action against Mr Scott and Mr van

Berkel.

[4]      The action taken is set out in more detail in the District Court judgment.[1]  In summary it involved:

[1] Scott v Elmslie Estate Ltd DC Wellington CIV-2010-085-550, 20 July 2012.

(a)      Sending invoices to Mr van Berkel for encroachment of a garage (by one square metre) onto Elmslie Estate land, for using the right of way for car parking, and use of part of the right of way for the storage of firewood;

(b)Sending  invoices  to  Mr van  Berkel  and  Mr Scott  for  the  cost  of replacing a potentially dangerous power pole, threatening referral to a debt  collection  agency and  approaching  Mr van  Berkel’s  bank  for payment;

(c)       Spraying a “cut” sign on Mr van Berkel’s garage;

(d)Placing one two-tonne concrete block on the right of way (in an area used  for  parking),  and  another  one  on  the  last  portion  of  the accessway to Mr Scott’s property which was on land owned by a third party and in respect of which there was no formal right of way; and

(e)      Serving a trespass notice on Mr Scott and attaching signs on a pole on the right of way stating “No Trespassing” and “Vehicles will be towed”.

[5]      Mr Scott and Mr van Berkel had no success in seeking to discuss matters with Mr Graham. They decided to commence proceedings.

[6]      The claim was prepared and filed by counsel for Mr Scott and Mr van Berkel (Mr Langford). The claim sought various orders by way of relief. An application for interim relief was also sought. The interim orders sought were as follows:

a.        That     the     Defendants/Respondents    do     not     restrain     the

Plaintiffs/Applicants from their lawful use of the right of way;

b.Directing the Defendants/Respondents to remove the two concrete blocks from the driveway;

c.Restraining the Defendants/Respondents from taking any action to remove or otherwise change the garage of the Second Plaintiff/Applicant;

d.        Preserving the garage of the Second Plaintiff/Applicant.

[7]      Interim orders were granted in the following terms:

a.        That     the     Defendants/Respondents    do     not     restrain     the

Plaintiffs/Applicants from their lawful use of the right of way;

b.Directing the Defendants/Respondents to remove the two concrete blocks from the driveway;

c.Restraining the Defendants/Respondents from taking any action to remove or otherwise change the garage of the Second Plaintiff/Applicant;

d.        Preserving the garage of the Second Plaintiff/Applicant.

NOTE this Order in terms of 3.a. to d. above is made on the following basis:

...

3.        Costs     are     reserved,     including     the     costs     of     the

Respondents/Defendants in removing the block referred to below;

4.This order applies only to the block shown in the top photo in page 2 of the bundle of photos produced today by the Respondents/Defendants, which is to be removed within 5 days;

...

[8]      Following these orders, Mr Graham removed the concrete block from the last portion  of  Mr Scott’s  accessway and  placed  it  alongside  the  other  block  in  the parking area on the right of way.

[9]      Subsequently Mr Scott and Mr van Berkel amended the relief being sought in their substantive claim.   The amendment claimed damages for the first time, and made other changes to the orders that were sought.   The relief claimed was as follows:

1.An order requiring the Defendants to tend to the hazardous trees over the right of way.

2.        An order or declaration stating that the Plaintiffs’ do not owe money

towards the invoices for the power pole.

3.An  order  restraining  the  Defendants  from  taking  any  action  to remove or otherwise change the garage of the Second Plaintiff.

a.If the Court is not minded to grant a permanent preservation order as described above, then an order is sought restraining the  Defendants  from  taking  any  action  to  remove  or otherwise change the garage of the Second Plaintiff for a period of three (3) years.

4.An order directing the Defendants to remove the two concrete blocks from the driveway and to repair the damage done previously and at final removal.

5.An order that the Defendants do not restrain the Plaintiffs from their lawful use of the right of way.

6.        An  order  for  payment  of  $10,000  from  the  Defendants  to  the

Plaintiffs in damages for:

a.the  private  nuisance  resulting  from  disturbance  of  the easement;

b.        unlawful interference with the relationship with the Second

Plaintiff’s bank.

7.        Costs.

8.        Interest.

[10]     Along the way attempts were made to settle the proceeding.   Offers were made  by  each  side.     The  sticking  point  from  Mr Scott  and  Mr van Berkel’s perspective was that Mr Graham required their consent to his house development as part of any settlement.   They were not prepared to give that without information from Mr Graham on stability issues.  Eventually, on the morning of the hearing, the parties negotiated a settlement.

[11]     The settlement reached was in these terms:

[1]       This  proceeding  having  come  on  for  hearing  on  23  April,  the following orders are made by consent:

1.Within 18 months, the second plaintiff will relocate the garage that encroaches  on  the  right-of-way,  so  as  to  end  the  encroachment. Within 14 days, the second plaintiff will pay the defendants $365.00 for the right to occupy the land encroached upon until the garage is removed.  Should the garage remain in place at the end of 18 months from 23 April 2012, the defendants shall be entitled to remove the encroaching portion of the garage, without liability to the second plaintiff.

2.        No order is sought in relation to trees.

3.The defendants agree to permit non-obstructive parking on the right- of-way by the plaintiffs and their invitees.

4.Neither  defendant  will  obstruct  the  right-of-way,  or  the  first plaintiffs’ informal rights of access including at or beyond the boundary between the first defendant’s land and that owned by Silverstream Forestry Limited.   The defendants will remove the concrete blocks currently on the right-of-way within 14 days.

5It  is  recorded  that  the  first  and  second  plaintiffs  will  give  their consent as affected parties to the plans presented to them by the second defendant for the construction  of  a house  on  92  Elmslie Road.

[2]       Two issues remain outstanding, as to damages and as to costs.  The damages issue relates to the plaintiffs’ claims for damages, which remain disputed by the defendants; and the issue as to costs relates to the cost of the proceeding.

[3]       As proposed by the parties, I will resolve these issues on the basis of

Memoranda to be filed.

[4]       The plaintiffs are to file and serve submissions within 14 days of

23 April 2012, and the defendants are to file and serve submissions in reply within a further 7 days.

[12]     In accordance with this agreement, the parties each made submissions on damages and costs and the Judge gave his decision.   The Judge awarded $5,000 exemplary damages to Mr Scott (in relation to blocking the right of way with the concrete blocks) and costs in favour of Mr Scott and Mr van Berkel on a 2B basis. Mr van Berkel’s claim for damages failed.

[13]     Mr Graham/Elmslie Estate Ltd contends that exemplary damages should not have  been  awarded  because  none  were  claimed  in  the  pleading  nor  was  there anything in the submissions to alert him that they were being sought.   If that is correct then Mr Graham/Elmslie Estate Ltd must succeed.  A defendant to litigation is entitled to know the case he has to meet.  Whitten-Hannah v Davis[2]  provides an example where an award of exemplary damages was set aside because it was not pleaded nor referred to in submissions.

[2] Whitten-Hannah v Davis [1995] 2 NZLR 141 (CA) at 150.

[14]     There is no doubt that the claim did not refer to exemplary damages and that the submissions for Mr Scott and Mr van Berkel did not specifically refer to them. Mr Scott and Mr van Berkel respond that it was obvious that exemplary damages were being claimed because no loss (other than minor damage to the right of way) was alleged to have been suffered.  It is necessary to consider what the submission did say on the issue of damages to determine whether it was obvious that they were being claimed.

[15]     On this topic, the submissions for Mr Scott and Mr van Berkel (which were filed on their behalf by counsel) commenced by stating that the amended relief sought  in  order  for  payment  of  $10,000  “in  damages  for  the  private  nuisance resulting from disturbance of the easement, and for the unlawful interference with the relationship between [Mr van Berkel] and his bank.”  The submissions also said that Mr Scott and Mr van Berkel had suffered loss of time spent dealing with the nuisance and that Mr van Berkel had lost pay in attending a court hearing.

[16]     Under the heading “Disturbance of easement” the submissions:

(a)       set out the time sequence relating to the concrete blocks, beginning with their placement on the right of way on 4 May 2010 and their

eventual removal (pursuant to the consent orders) on 2 May 2012;

(b)referred to Mr Scott having a serious heart condition, requiring him to have unhindered access to his property to allow ambulance access in the case of an emergency;

(c)      said that the disturbance of the right of way had caused Mr Scott and Mr van  Berkel  “great  stress,  and  damage  and  expense,  over  a considerable period”; and

(d)referred to legal commentary which stated that the disturbance of an easement is a private nuisance, that it is necessary to show some substantial interference with the enjoyment of the easement, and that proof of actual pecuniary loss was not essential.

[17]     Submissions were also made under the heading “Unlawful interference with

relationship between [Mr van Berkel] and his bank”. These submissions:

(a)       set out the chronology in relation to the electricity pole invoices;

(b)recorded  that  the  invoices  were  not  rescinded  and  noted  that  no apology had been made; and

(c)      submitted that the approach to the bank which had been made on Mr Graham’s behalf, was “underhanded” and caused Mr van Berkel “considerable stress and embarrassment.”

[18]     The submission concluded:

27.Both the interference with the easement, and the purported invoice for the power pole, were some form of attempted “payback” by the Defendants.   Accordingly, due to the disturbance of the easement and unlawful interference with the relationship with the Second Plaintiff’s bank it is submitted that an order be made for payment of damages of $10,000.00 from the Defendants to the Plaintiffs.

28.In addition to the above, the Plaintiffs have incurred stress and had their  time  wasted  from  the  time  they  received  the  power  pole invoices  until  final  conclusion  of  this  matter.    They  have  also incurred wasted time, stress and cost in obtaining information, and making futile attempts to communicate with the Second Defendant to resolve matters.

[19]     It can be seen that the claim was for compensatory damages (for the minor damage to the road and for the wasted time, inconvenience and stress caused by disturbance to the easement and the interference with Mr van Berkel’s relationship with the bank).   The loss arising from damage to the road was not proven with evidence as to the cost of repair.   The claim for damages was essentially one for general damages to compensate for the disturbance.   The only mention of matters that might possibly have gone to exemplary damages (had they been claimed) was the  reference  to  Mr Graham’s  actions  as  a  form  of  “payback”.     The  reply submissions on behalf of Mr Graham and Mr Scott added nothing of significance on the   topic   of   damages.      I   conclude   that   the   submissions   did   not   alert Mr Graham/Elmslie Estate Ltd (or counsel) that exemplary damages were being sought.

[20]     That is confirmed by a review of the submissions for Mr Graham/Elmslie

Estate Ltd.  On the topic of damages, they commenced with this:

30.In principle, damages compensate a plaintiff for loss suffered when a wrong is done.  First the plaintiff must succeed by proving its case on a recognised cause of action.   Second, the plaintiff must prove what loss it has suffered, and therefore what sum of money would properly compensate it for that loss.

[21]     Surprisingly when the claim was for “nuisance”, the submissions then went on to discuss the claim as one for trespass.   It was said that on the one hand the parked cars and the garage encroached unlawfully onto Mr Graham’s land and on the other hand Mr Graham had deliberately placed the concrete blocks on the rights of way.   The submissions referred to legal authority to the effect that trespass is actionable per se (without proof of damage), but only nominal damages are awarded for  the  purposes  of  vindicating  the  right  where  no  damage  is  proven.    The submissions  included  a  quote  from  that  authority which  included  the  statement “exemplary damages may be awarded where the conduct of the defendant merits

punishment, where he acts in contumelious disregard of the plaintiff ’s rights”.[3]   This

was the only mention anywhere in the submissions for any party of exemplary damages.

[3] Taylor v Beere [1982] 1 NZLR 81 (CA) referred to in Mayfair Ltd v Pears [1987] 1 NZLR 459 (CA) at 465.

[22]     It was submitted that one of the blocks did not impede access and, while the other block may have inconvenienced Mr Scott, the offending block was placed on land over which Mr Scott had no formal right of way.   It was submitted that the offending block caused inconvenience (because Mr Scott had to park 200 metres from his house for six and a half weeks) rather than loss.   The reliability of the evidence about Mr Scott’s heart condition was doubted and it was contended that Mr Scott and Mr van Berkel had not mitigated their position (by accepting proposals made by Mr Graham’s solicitor).

[23]     The submissions on this claim concluded that each party could recover a nominal award against each other and could recover compensation for any actual loss they could show in respect of each other’s trespass.  It was accepted that Elmslie Estate Ltd and Mr Graham had brought no counterclaim for damages for the trespass and had not proven loss.  It was submitted that, as Mr Scott and Mr van Berkel had also not proven loss, the possible awards of nominal damages could cancel each other out.

[24]     On the question of damages for the alleged  unlawful interference in  the relationship with the bank, it was submitted that no tort was committed because the contract between Mr van Berkel and his bank was not broken.  It was submitted that without a cause of action, Mr van Berkel had no right to any damages.

[25]     The relevant parts of the District Court judgment on this topic are as follows:

[27] The plaintiffs claim $10,000.00 damages covering two aspects of the disputes between the parties:

1. Private nuisance resulting from disturbance of the easement.

2. Unlawful interference with the relationship between the second plaintiff and his bank.

[28] I deal with the unlawful interference claim first. It seems to be common ground that Mr Graham’s solicitor approached Mr van Berkel’s bank in an attempt to get the invoice paid. As I have already observed, it is unclear to me why the solicitor could possibly have thought that it was appropriate for him to approach the bank in this way, much less that the bank might actually make payment. Be that as it may, however, there is no evidence that the bank took any step to alter the nature or quality of its relationship with Mr van Berkel or to cause him loss in any way. So far as the evidence goes, it simply (and of course correctly) took no action at all in response to the solicitor’s

approach – apart from advising Mr van Berkel that the approach had been made.  As  no  loss  can  be  demonstrated,  the  claim  for  damages  cannot succeed.

[29] The  claim in  respect  of  the  “disturbance  of  the  easement”  is  in  a different category. That claim can relate only to the deposit of the concrete blocks and to the damage allegedly done to the surface of the driveway.  ...

...

[32] I accept that, with the exception of a complaint about minor damage to the tar seal and gravel surfaces of the driveway, no loss or damage has been sustained  by  the  plaintiffs.  It  seems  that  Mr Scott  himself  repaired  the surfaces, but there is no evidence of any actual cost being incurred. As Mr Scott’s  claim  for  interference  with  his  access  lies  in  trespass,  it  is actionable without proof of loss or damage; but a mere infraction of the plaintiffs’ rights to use the right-of-way, without such proof, would normally give rise only to nominal damages. Nevertheless, as Mr Michalik accepts, exemplary damages may be awarded in tort in cases where a defendant “acts in contumelious disregard of the plaintiffs rights” (Taylor v Beere [1982] 1

NZLR 81).

[33] In my view, this is such a case. As Mr Graham well knew, Mr Scott and his visitors had every right to use the right of way for vehicle access, and he had not the vestige of a right to interfere with that. As he freely accepts, he chose to block the right of way for the purpose of applying pressure on Mr Scott to achieve the collateral objective of getting Mr Scott to agree to his building plans. The means he chose were clearly unlawful. There were of course  lawful  means  open  to  Mr Graham to  proceed  without  Mr Scott’s agreement: he could have at least embarked on a formal application to the Council for consent, so that the validity of any objection Mr Scott might have had could be tested.

[34] I consider that this behaviour on the part of Mr Graham merits an award of exemplary damages.

[35] In calculating such damages, I take into account also the following matters: the inconvenience caused to Mr Scott and his family by having to park some distance from the property and walk back and forth to their cars for a period of some 6 weeks; the fact that Mr Graham did not fully comply with the injunction so that access around the blocks remained restricted (there are issues of both contempt of court and exemplary damages bound up in that); and the modest damage to the surface of the right of way.

[36] I fix the damages at $5,000, payable to Mr Scott.

[26]     No formal cross-appeal was filed in relation to the Judge’s finding that no loss was suffered by Mr van Berkel.  However Mr van Berkel’s written submissions on this appeal claimed exemplary damages in relation to the claim for interference with his relationship with his bank.  Mr Scott supports him in this claim.  Although Mr van Berkel understandably feels aggrieved by Mr Graham’s actions, the Judge’s

conclusion that no loss was suffered is correct.   The relevant tort was inducing a breach  of  contract  or  (possibly)  intentionally  causing  loss  by  unlawful  means. Neither torts were made out because there was no breach of contract nor unlawful means as those causes of action require.[4]   Further, both torts require that damage be suffered.[5]  There was nothing that might qualify as damage here.  In any event, it was not open to the Judge to award exemplary damages on this claim when they had not

been pleaded nor signalled in the submissions to the Judge.  If they had been pleaded or signalled there may have been matters which Mr Graham would wish to raise in his defence of them.

[4] Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington 2009) at

[13.2.02] and [13.3.02].

[5] At [13.2.06] and [13.3] where the tort is described as one of intentionally causing “loss”.

[27]     On the nuisance claim the Judge appears to have thought, wrongly, that it was for trespass (presumably on the basis of the submissions for Mr Graham).  The claim and submissions in support of the claim was for nuisance, for disturbance of an easement (by the concrete blocks).  There is no doubt that exemplary damages were not specifically pleaded nor addressed in the submissions and that award cannot stand.    If  they  had  been  claimed  Mr Graham  would  have  wished  the  Court  to consider his view that he was attempting merely to insist that Mr Scott and Mr van Berkel adhere to their strict legal rights rather than intending to disregard their rights.

[28]     However it does not follow that only nominal damages of, say, $1 were recoverable as is contended for Mr Graham/Elmslie Estate Ltd. A claim for nuisance protects a person’s right to the use or enjoyment of an interest in land.  The nuisance need not be directly on the plaintiff’s land.   Indirect interference with land can

qualify, provided that the interference is substantial and unreasonable.[6] The concrete

block on the parking area on the right of way was a lesser intrusion than the other concrete block, because it did not impede access to either Mr Scott and Mr van Berkel’s  properties.   The  concrete  block  that  was  placed  on  the  portion  of  the driveway  owned  by  a  third  party  did,  however,  substantially  and  unreasonably impede Mr Scott’s access until it was removed after the injunction.   That was an interference with Mr Scott’s use or enjoyment of his land in that he could no longer

access that land by car.

[6] At [10.2.01] and [10.2.03].

[29]     Damages  in  nuisance  are  available  to  compensate  the  person  for  any diminution  in  the  value  of  the  plaintiff’s  interest  in  land  or  possibly,[7]   in  the alternative, for the cost of restoring the property.   A transitory nuisance may not cause any loss of this kind.  Nevertheless the plaintiff can claim for “the depreciation in  the  amenity value  of  the  property during  the  period  for  which  the  nuisance persisted”.[8]    In the absence of any other appropriate measure of this loss the court can award a sum of general damages for the loss of amenity.[9]     That award can include an amount for stress and inconvenience.[10]

[7] Subject to issues about whether the cost of restoration is disproportionate to the diminution in value of the property.

[8] At [10.2.09].

[9] At [10.2.09] and [25.2.09].

[10] At [25.2.09].

[30]     In my view Mr Scott is entitled to general damages for his loss of amenity for the six week period that the concrete block impeded his access and for the associated stress from that loss of amenity.  The Judge essentially accepted that there was a loss of amenity in referring to the evidence that Mr Scott and his family were forced to park some distance from their property and walk back and forth from their cars for a period of some weeks.   This was one of the factors that he took into account in assessing the amount of exemplary damages.   However he also took into account other factors which he saw as warranting an award of exemplary damages.  I reduce the award made by the District Court to $2,500 to reflect the irrelevant factors taken into account.  I consider that the award needs to be more than minimal in order to be compensatory, but cannot be too high because the obstruction did not extend for a lengthy period.

[31]     For completeness I note that Mr van Berkel sought exemplary damages in relation to this appeal.  Such an award is not, however, available for this.

Costs

[32]     Mr Graham/Elmslie  Estate  Ltd  submits  that  the  Judge  was  in  error  in awarding costs in favour of Mr Scott and Mr van Berkel.   They submit that costs

could have been awarded in their favour in respect of the injunction, but thereafter

they continued their claim on matters on which they were not ultimately successful. Mr Graham/Elmslie  Estate  Ltd  submit  that  if  the  terms  of  the  settlement  are considered,  both  parties  achieved  a  measure  of  success.    They  submit  that  in awarding    costs,    the    Judge    wrongly    considered    that    the    conduct    of Mr Graham/Elmslie Estate Ltd prior to the commencement of the proceeding was relevant.      They   also   submit   that   the   Judge   was   wrong   to   think   that Mr Graham/Elmslie Ltd had caused any problems in the conduct of the proceeding when they were without representation.   That was for a short period only and the evidence showed that Mr Scott and Mr van Berkel had no difficulty in contacting the lawyers acting for Mr Graham/Elmslie Ltd.

[33]     The relevant part of the District Court Judgment on this topic is as follows:

[38] Essentially, the plaintiffs say that they had no choice but to issue proceedings in June 2010 after Mr Graham threatened damage to Mr van Berkel’s garage and placed the concrete blocks on the right of way.   The injunction issued in the proceeding resulted in the partial removal of the concrete blocks so that the right of way could at least be used by Mr Scott. It also dealt with the risk of any imminent attempt to interfere with the garage.

...

[44] The usual position, as Mr Michalik submitted, is that costs follow the event, so that, in general, an award of costs would reflect the degree of success of the party recovering costs. On that basis, the plaintiffs would not be entitled to costs.  But I note that Mr Michalik did not take into account the interim injunction which the plaintiffs successfully sought and held, and which,   essentially   permanently,   solved   Mr Scott’s   immediate   access problems.

[45] As r 4.1 of the District Court Rules 2009 makes clear, all matters concerning costs are at the discretion of the Court.   That discretion is a general and, by virtue of r 4.1.3, overriding one.  I consider that the existence of this overriding discretion is a critical factor in determining costs in this case; and that in exercising that discretion I should consider the stance of the parties in their approach to the litigation.

[46] Rules 4.6 and 4.7 deal with increased costs and indemnity costs and the refusal of or reduction in costs.  They proceed on the basis of entitlements or obligations concerning costs which already exist.  But they do not deal with a situation like the present one, where the entitlement to costs is at large and neither party can be deemed the successful one.

[47] Nevertheless those rules give guidance, in my opinion, as to the way in which the overriding discretion should be exercised in this case.  Both rules refer to the conduct of a party in contributing unnecessarily to the time or expense  of  the  proceeding  by,  inter  alia,  pursuing  unnecessary  steps  or

advancing   arguments   that   lack   merit,   failing,   without   reasonable justification, to accept legal argument, or failing, without reasonable justification, to accept an offer to settle or dispose of the proceeding.  Rule

4.6.4  (which  deals  with  indemnity  costs)  also  refers  to  a  party  acting

“vexatiously, frivolously, improperly, or unnecessarily” in relation to the

proceeding.

[48] I therefore consider that I have a general discretion to order costs if the defendants can be shown to have behaved in a way comparable with the conduct referred to in Rules 4.6 and 4.7.   I make it clear that I am not referring to an award of increased or indemnity costs: the question is simply whether, even accepting that Mr Michalik is correct in his analysis of the outcome of the proceeding, the plaintiffs may nevertheless be awarded costs on the grounds of the defendants’ behaviour.   The plaintiffs do not seek increased or indemnity costs.

[49] The question remains whether in fact the defendants were guilty of the behaviour asserted by Mr Langford.

[34]     The  Judge  then  considered  the  conduct  of  Mr Graham  in  taking  actions without  warning  (re  the  encroachments  and  in  relation  to  the  electricity  pole invoices), being unresponsive to approaches from Mr Scott and Mr van Berkel to discuss matters (before and after the litigation was commenced) and in taking the various action he had out of anger and frustration.

[35]     He concluded:

[51] In the light of these actions and attitudes on Mr Graham’s part, and regardless of the overall rights and wrongs of the situation, the plaintiffs had no alternative but to commence the proceeding. In my opinion, the defendants’ conduct of its case resonates with the conduct identified in the parts of the rules earlier referred to.  Those parts of the rules also go some way towards capturing the flavour of what Mr Langford asserts.

[52] The answer to Mr Michalik’s analysis of the ultimate outcome is that this is one of those cases where the outcome of the process rather than success or otherwise in formal terms is the correct standard by which to measure entitlement to costs.   For the plaintiffs, success lay in achieving resolution  of  disputes  which  had  festered  for  a  decade  rather  than  in receiving an award of money or orders in their favour.  The fact is that, had the defendants behaved in the manner sought by the plaintiffs in their initial pleading (see [40] and [41] above), it is unlikely that the litigation would have been required at all. That is evident from the fact that, once Mr Graham had engaged experienced counsel, a settlement was negotiated, on terms which were of benefit to the defendants, within the space of a morning.  That negotiation  and  its  outcome  speaks  for  itself  as  to  the  consequences  of Mr Graham’s  discourteous  and  obstructive  attitude  to  resolution  of  the matters in dispute.

[53] I therefore consider that I should exercise my discretion to award costs to the plaintiffs despite their limited success in the litigation.

[36]     Counsel for Mr Graham/Elmslie Estate Ltd may be correct that there were errors by the Judge as to Mr Graham’s availability and responsiveness to discussions once  the  litigation  commenced.    Mr Scott  and  Mr van  Berkel  respond  that  the problem  with  the  discussions  was  that  Mr Graham  was  not  prepared  to  settle anything unless they consented to his house proposal.   They wanted data from Mr Graham before they would do that and the data was never provided.

[37]     However, in my view what was more important to the Judge’s assessment of costs  was  his  view  that  Mr Scott  and  Mr van  Berkel  had  succeeded  in  their proceeding simply because they had achieved a resolution.   The Judge was not seeking  to  impose  costs  because  Mr Graham  had  been  difficult  prior  to  the proceedings   being   commenced.      Rather,   he   saw   Mr Graham’s   conduct   as demonstrating that a resolution was needed to the disputes that had arisen between the three neighbours.  The precise form that resolution took was not really the point. I consider that this was an available approach under the costs discretion for the reasons the Judge explained.

[38]     Moreover, in my view Mr Scott and Mr van Berkel were entitled to costs for other  reasons.    They  were  the  successful  party  in  the  injunction  application. Mr Scott was also successful in the only issue (apart from costs) that went to the Court for determination, that being the claim for damages.

[39]     The Court would not normally order costs on the basis of an assessment of who succeeded the most in a settlement they reached.  Even if the settlement terms were to be considered, however, I disagree that they show that the parties were equally successful in the proceeding or that Mr Graham/Elmslie Estate Ltd were more successful.   Mr van Berkel obtained more time to remove the encroaching portion of his garage, Mr Scott and their invitees were able to park on the right of way, and the two concrete blocks were to be removed.  The only matter they did not succeed  on  was  the claim  in  relation  to  the trees  which  were on  Mr Graham’s property and which Mr Scott and Mr van Berkel believed were dangerous.   The payment of rent for the encroachment of the garage and the consent for the house

proposal were not claims that had been brought by Mr Graham/Elmslie Estate Ltd. They were compromises Mr Scott and Mr Graham were prepared to make to achieve a resolution of matters.

[40]     For completeness I note that Mr Scott submits that the Judge made an error in calculating the costs.   Although no cross-appeal was filed, I am not satisfied that there was any error made.  Where a settlement proceeds “on the courtroom door” there is no “hearing” even though the preparatory work may all have been done.

Result

[41]     Mr Graham/Elmslie Estate Ltd succeed in part.   The award of exemplary damages in Mr Scott’s favour is quashed.   It is replaced with an award of general damages of $2,500 in  Mr Scott’s favour.   The costs order in the  District Court remains.  Costs on this appeal are to lie where they fall.

Mallon J

Solicitors:

Morrison Kent, Wellington for the Appellants