Grey District Council v Banks

[2013] NZHC 2304

IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY

CIV-2012-418-000005 [2013] NZHC 2304

UNDER

the Property Law Act 2007

BETWEEN

GREY DISTRICT COUNCIL

Applicant

AND

DOUGLAS BANKS

First Respondent

CHRISTINE SANDRA BANKS
Second Respondent

Hearing:	3 September 2013 (On the papers)
Appearances:	J Shackleton and D M Miller for the Applicant C S Banks in Person on behalf of Respondents
Judgment:	5 September 2013

JUDGMENT (2) OF FOGARTY J

Introduction

[1]   It was the judgment of this Court on 19 June 2013 that the respondents, Mr and Mrs Banks, are parties to a valid lease and so are liable for the payment of their rent arrears.  Costs were reserved.

[2] Mr and Mrs Banks have paid the  outstanding  arrears.  The  successful applicant now seeks costs according to scale 2 with a 10% uplift, together with disbursements; and certification for second counsel.

[3] The argument follows upon the usual rule, that the party who fails should pay costs to the party who succeeds.1

1       High Court Rules, r 14.2(a).

GREY DISTRICT COUNCIL v DOUGLAS BANKS [2013] NZHC 2304 [5 September 2013]

[4]    The successful party seeks costs primarily on a 2B basis (as is normal), but on a 2C basis for preparation of discovery and the bundle of documents. A total of 20.9 days at $1,990 = $41,591.

[5]     As to discovery, this is because the Court made orders directing the Council to provide discovery of certain documents at the request of Mrs Banks, making the exercise of discovery take far more time than is allowed for in Band B, and in fact exceeding the time allowed for in Band C.

[6] As to the bundle, it is submitted the time spent preparing bundles for the hearing was unnecessarily exacerbated by reason of voluminous affidavit evidence filed by Mr and Mrs Banks, many parts of which were ultimately ruled inadmissible, and time spent at Archives New Zealand to locate the map referred to in s 24 of the Reserves and Other Lands Disposal and Public Bodies Empowering Act 1911, which Mr and Mrs Banks relied upon at the hearing, ultimately unsuccessfully. Mr and Mrs Banks could have sourced the map themselves.

[7]      Finally, the successful party also seeks a 10% overall uplift, pursuant to r 14.6, on the grounds that Mr and Mrs Banks contributed unnecessarily to the time and expense of the proceedings. In particular it relies on four matters: the application for further discovery on 17 May 2012; the issue as to whether or not a forensic report challenging the authenticity of a document dated September 1979 should be admitted and, if so, on what basis (subsequently abandoned); thirdly, that the Council’s submissions addressed grounds of opposition (which were subsequently abandoned), of mistake and estoppel; fourthly, wasted costs preparing submissions to the Court on the inadmissibility of large parts of their evidence, and also unnecessarily preparing for cross-examination.

[8]      This brings total costs sought to $45,750.

[9] It seeks disbursements in the sum of $13,758.22 for travel to two hearings, agency fees, search fees, courier charges, Court filing, setting down and hearing fees, and the fee charged by the police document examiner instructed by the Council to

examine the September 1979 letter, and various other search fees and photocopying charges.

[10] Mr and Mrs Banks oppose any award of costs. They submit that if costs were awarded against them it would seriously affect their ability to retain their home. It is submitted this was well understood by the applicant, and that the applicant should have tried to avoid the legal proceedings by engaging in an ongoing offer from the lessees to meet and settle the matter. Rather, the applicant Council met such requests “with stony silence”. They also submit that the action has been “vexatious against us personally; we were one of five lessees that the council filed a notice against under the Property Law Act 2007. We are the only lessees who had legal action filed against them.” Finally, Mr and Mrs Banks seek “some compassion” to allow their appeal from the decision of the High Court to the Court of Appeal to proceed unheeded by costs awarded prior to that determination being made.

[11] Mr and Mrs Banks were unrepresented by counsel at the hearing, and they reiterate that they had no further legal assistance after having released their previous counsel in late 2012, due to financial hardship.

[12] Replying to the specific arguments of the applicant, the respondents say that the relevant documentation should have been resolved in good faith from 2009, when the dispute started, independently of discovery by legal proceedings. That a good deal of the information was stored at the old Greymouth Harbour Board offices and could have been inspected by the respondents personally. The release of some information by the Council itself generated concerns that there had not been full discovery, hence the application for discovery.

[13] In respect to the preparation of the bundles, the respondents rely on the fact that they were unrepresented at material times and, that the issue as to whether or not evidence would be read was to be determined by the trial Judge not by the Associate Judge handling interlocutory matters, Associate Judge Matthews. They say that they had provided the map of Blaketown, referred to within s 24 of the 1911 Act, Sheet J31/32 20, showing the same reserve as accompanying that statute.  In respect of the

review of further and better discovery, there was an application which was withdrawn, and they believe that the applicant is seeking costs in respect of that.

[14] They dispute the obligation to pay for the forensic report. They say it was not raised with myself or themselves that the applicant was going to seek a forensic report, irrespective of whether or not they, as respondents, could present their forensic report. They oppose having to meet costs in respect of mistake  and estoppel, essentially arguing those arguments were marshalled in good faith. Later, they endeavoured to confine their argument to their best argument. Overall, they consider they were entitled to have these various issues decided by the Judge at the trial, and they were not issues properly to be resolved pre-trial.

[15] As to the uplift and disbursements, they submit generally that the legal action was entirely avoidable, that there ought to have been discussions which would have led to a settlement. They have not been accused of making a frivolous and vexatious pleading in opposition. They repeat, they consider the legal process option was chosen for vexatious reasons, rather than as a last resort.

[16] Following these submissions, the Court issued a minute dated 4 July 2013. In this minute I invited the applicant’s solicitors to respond to the resolution of the applicant Council in August 2009, recording:

Council takes note that our legal position is probably in the clear, but that there are a number of grounds upon which an awkward challenge can be brought. A lack of knowledge and understanding of what actually happened may be a threat to Council’s position.

[17] The memorandum went on to point out that the Council succeeded principally by reason of the doctrine of non est factum. It succeeded by the application of black letter law. The leases down to 1979 were renewable at the option of the Council as lessor to decide at the end of every 21 years whether there should be another lease. In 1979 the Council took this option to offer a new lease now subject to a seven year rent review.

[18] On 4 July 2013, I was of the view that Mr and Mrs Banks should pay some order for costs, but was by no means convinced it should be the sum as sought.

[19] On 15 July 2013, the respondents argued that the applicant had misled the Court with regard to illegal clauses within the original lease renewable at the option of the lessor, again in 1937, and in the renewed lease of 1979. That the misleading proposition was as to lease type. They argue that both parties, at the time, in 1979 and 2000, treated the leases as being perpetually renewable. They were caught by surprise, and devastated, when the lessors denied that these leases were perpetually renewable. They relied on the fact that a minute of the High Court by Chisholm J in these proceedings assumed that they were perpetually renewable leases, and so did the Court of Appeal in earlier litigation in 2003, associated with arbitration disputing the valuation of rent, and on an affidavit of Mr Pretorius.

[20] That led to a second memorandum, dated 17 July 2013, from the applicant, replying to this minute of 4 July 2013 and the respondents’ memorandum, dated 15 July 2013. On matters arising from the Court’s minute of 4 July 2013, counsel for the applicant disclosed a letter that the applicant Council had written to the lessees, 3 July 2009, which expressed in more confident terms the position of the Council. Principally, the letter relied on the proposition that the November 1979 leases (introducing seven year rental terms) were signed by the lessees without challenge. They relied on the doctrine of non est factum. These are the two propositions that they eventually won on. They opposed releasing earlier information, relying both on the unavailability of the information readily and the Limitations Act.

[21] The reply submission also rejected the proposition that the Council had not tried to settle the case on a without prejudice basis, but rather contended that they had met with Mrs Banks on that basis in 2009, and corresponded extensively. They had also attended a judicial settlement conference, following which further without prejudice discussions took place. They also dispute that they acted vexatiously. Generally they relied again on the fact they had succeeded in these proceedings, and that for the future it should be understood that all residential leases have been perpetually renewable, at the option of the lessees, since the 1997-2000 “renewal”, including the lease to which Mr and Mrs Banks are parties.

[22] The applicant’s memorandum of 17 July 2013 also disputed that they had misled the Court.   It argued that on a proper construction the prior leases of the

subject property in this proceeding from 1937 and 1979 were not perpetually renewable.

[23] Mr and Mrs Banks replied on 18 July 2013 (the next day). They took exception to the disclosure that they had offered to meet with Council on a without prejudice basis to settle the issues in respect of the 1937 lease to Mr Harry Cox. They reiterated that they never stopped trying to settle, but met with stony silence.

[24] The submission reiterated reliance on the record of the Council in August 2009, that there are a number of grounds upon which an awkward legal challenge can be brought.

[25] Mr and Mrs Banks submitted that the applicant Council had misled the High Court with regard to its knowledge about the leases being perpetually renewable leases. They argue that the 2000 leases rested on the 1979 lease, which rested on the 1937 leases, and that it is wrong to deny that all are renewable leases.

[26] Without spelling it out, I think the distinction they are trying to draw is that the earlier leases were perpetually renewable at the exercise of the lessor, but only the 2000 lease is perpetually renewable by the lessee.

[27] On 5 August 2013, the respondents filed a further memorandum pursuing their request for release of the full report “A Way Forward”, being the report presented to the Council on 10 August 2009, for which privilege was sought. They argue that this was relevant to part of the argument by the Council, that the leases prior to 1997 were for a defined period only, and could be ended at the expiry of the lease term by the Harbour Board. That the first renewable lease at the exercise of the lessee was the year 2000.

[28] On 12 August 2013, the applicant replied to the memorandum of the respondents, dated 5 August 2013. Essentially they said the issues were going over old ground. The purpose of the minute was to reject the notion that the Council or its solicitors had misled the Court on discovery.  They relied on solicitor/client privilege

for internal communications. The applicant’s solicitors pointed out that the respondents had the opportunity to challenge discovery prior to the hearing.

[29] On 14 August 2013, the respondents replied, arguing the Council report “A Way Forward”, presented on 10 August 2009, was not covered by legal privilege. They pursued their argument that the Council had misled the Court.

Analysis

[30] A Glasgow lease is a lease of land on 21 year terms, perpetually renewable by the lessee. The original Glasgow leases provided for rent renewal every 21 years.

[31] The first lease and subsequent leases in 1937 and 1979 were leases for 21 year terms, renewable at the option of the lessor. That fact enabled the lessor to refuse renewal at the expiry of the 1937 lease and offer a 20 year renewable lease, again by the lessor, in 1979, but with rent reviews every seven years. It was only in 2000 that the new leases were renewable by the lessees for 21 years on seven year rent review terms.

[32] There was evidence that throughout this period of time the leases were all generically referred to as renewable.2 But of course there was a critical difference in power between the parties as to whether they were renewable by the lessor or by the lessee. This is a matter discussed in the High Court judgment. There was certainly room for lessees to assume that they had Glasgow leases, and that was the belief of the other lessees.

[33]  The applicant succeeded by reliance on the common law of contract, holding the respondents to the terms of the lease that they had executed and that their predecessors had executed, deeming them to know and agree the power to renew was with the lessor.

[34] There was an arguable illegal contract dimension to the case. The lessor was never a private person. The lessor was incorporated by statute for statutory purposes.  It is arguable that all its powers were and remain subject to the overriding

2       Grey District Council v Banks [2013] NZHC 1485 at [24].

principle of public law, that all statutory powers should be exercised in good faith and for their proper purpose.

[35] It was arguable, as the judgment reflects, that the original leases and particularly the 1937 and 1979 leases were in breach of the Public Bodies Leases Acts (08/69). These issues are being taken forward to the Court of Appeal.

[36]  In the meantime, however, costs follow the event.  Costs cannot be avoided on the basis that there was a viable argument which did not find favour with the Court and, therefore, costs should be reduced.

[37]   It follows that unless there are exceptional reasons there ought to be an order of costs against the respondents.

[38]   There was no deliberate misleading pre-trial conduct by either the Council, its solicitors, or its counsel. There is no basis for setting aside the principle that costs follow the event.

[39]   The only significant issue as to costs is the question of whether there should be category C costs for discovery and preparation of the bundles and a 10% uplift for unnecessarily contributing to the expense of the proceedings.

[40]  The judgment of the High Court found as a fact that the leases were notified on the certificate of title as renewable leases at all material times.3 Counsel for the applicant Council submitted that under the Public Bodies Leases Act 1908, s 5, and its counterpart provision in 1969, s 7, which limit duration of leases, other than Glasgow, to 50 and 99 years respectively, the phrase “a tenancy without right of renewal” meant renewal by the lessee.4

[41] Throughout both of the hearings, in March and May, Mr Shackleton was always very clear that the leases prior to 2000 were justified by reason of the power in s 5(c) of the Public Bodies Leases Act 1908 to enter into a tenancy for any term

3 At [24].

4 At [29].

not exceeding 50 years without right of renewal (by the lessee),5 and its counterpart s 7(1)(c) for a term not exceeding 99 years without right of renewal (by the lessee) in the Public Bodies Leases Act 1969.6 Mr Shackleton deployed this argument before the issues were refined down to the two points by the end of the first hearing.7

[42] Yet, at the same time, Mr Shackleton was aware that the conveyancing on these leases under the Land Transfer Act 1952 always were on the basis that they were renewable leases.8  That was the notation on the certificates of titles.

[43] I think it is more probable than not that the context of  the  Council’s resolution in August 2009, referring to a number of grounds upon which an awkward challenge could be brought, included the very unusual character of the original leases, being renewable at the option of the lessor not at the option of the lessee. In these proceedings, Mr Shackleton’s submissions were always confident that this was a simple case. Yet the history of the leases, I think, can be fairly described as “awkward” for the Greymouth Harbour Board, and later the Council, to explain.

[44] This is so because, relying on these leases,  working  class  families  built homes. The early leases did provide compensation provisions should the lessor not renew. As the judgment records, it is too late now to know, however, whether there was ever any realistic political prospect whereby the Harbour Board/Council as landlord could refuse to renew the leases.9

[45] In this Court, the black letter law reliance on ss 5(c)/7(c) (08/69) would shut off enquiry into whether or not the original Blaketown leases of land for housing could be examined against the public law principle, as distinct from private law principle, of the exercise of statutory powers for the purposes for which they were granted. Such an argument would be an “awkward challenge” to be avoided if possible.

5       At [25] and [26](c).

6 At [50].

7 At [22].

8 At [24].

9       At [62] and [63].

[46] The pre-trial case management conferences, after I was assigned as trial Judge, were absorbed in the question of whether there was any evidence that these were renewable leases, by the lessees. As Judge conducting those case management conferences, I had a role in encouraging the applicant Council to release the historic material going back to the original leases to examine the provenance of the concept that the lessor had the option to renew, even though principally the title of the leases were likely to be thought by lessees as renewable.

[47] This pre-trial judicial intervention directly contributed to further discovery, and is related to what in the end was unnecessary material in the bundle.

[48] For these reasons, I do not think the additional costs placed deliberately on the Council by the Court, in the public interest, should be visited on the respondents.

[49] On the other hand, the respondents should pay costs on a 2B basis, on the general principle that they brought the case and lost. In that regard, costs follow the event. They were liable for 2B costs in any event.

[50] I do not think for the same reasons there is any justification in giving the Council an uplift of 10%.

[51] The respondents seek compassion in the application of the schedules. The High Court Rules do not expressly allow for this. The respondents saw themselves, to a degree, as acting in the interests of all the remaining lessees, who have not taken the freeholding option. But this was not a test case. I think there is no discretion to be exercised by this Court in the respondents’ favour. Rule 14.1 has been severely qualified by case law.

[52] Accordingly, the calculation of costs needs to be adjusted in two respects. The first is applying old step 4.5, 1.5 days rather than 6 as to allowance for list of documents on discovery, and substituting 0.6 day rather than 1in respect of item 41. This involves a reduction of total days (6 - 1.5) = 4.5 + (1 – 0.6) 0.4 = 4.9, reducing the total days to 20.9 – 4.9 = 16 days.

[53] The applicant claims an allowance for second counsel, totalling 1.5 days, in respect of the February hearing (one day) and the May hearing (half a day). This was a case where second counsel was appropriate, and that is allowed. That brings the total recovery to 17.5 days x $1,990 = $34,825.

[54]     The disbursement costs are standard and are allowed at the claimed sum of

$13,758.22. Total:  $48,583.22.

[55] There is however a real question as to whether or not there should be an order that these costs be stayed prior to the decision of the Court of Appeal. I will reserve that point, and in the meantime stay the execution of the total judgment sum against the respondents. I reserve leave for the applicant to apply to lift the stay. The application, if made, will result in orders giving an opportunity to the respondents to disclose their financial position.

Solicitors:
Simpson Grierson, Wellington

Copy to:
D and C S Banks, Greymouth