Grow Build NZ Limited (in liquidation) v Timber Cabins Group Limited

[2024] NZHC 26

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1779

[2024] NZHC 26

BETWEEN

GROW BUILD NZ LIMITED (in

liquidation) Plaintiff

AND

TIMBER CABINS GROUP LIMITED

Defendant

Hearing:

On the papers

Appearances:

TJ Conder for the Plaintiff

JP Nolen and K Eastwood for the Defendant

Judgment:

26 January 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

[Costs]

This judgment was delivered by me on 26 January 2024 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Holland Beckett Law, Tauranga K3 Legal Limited, Auckland

GROW BUILD NZ LTD (in liq) v TIMBER CABINS GROUP LTD [2024] NZHC 26 [26 January 2024]

Introduction

[1]                 In my judgment dated 1 September 2023, I granted the defendant’s application for security for costs but recorded that my preliminary view was that costs ought to lie where they fall.1 This was because, prior to the application being filed, the liquidators of the plaintiff company, Grow Build NZ Limited (in liquidation), proposed that Grow Build pay $5,000 until discovery and that the question of further security be addressed at that stage. The defendant did not take up that offer. If it had, the defendant may have avoided the costs of the application. I asked the parties to confer and only to file memoranda if agreement could not be reached.

[2]                 Unfortunately, agreement has not been reached and memoranda have now been filed.

[3]                 The defendant submits that it has been successful in its application and costs ought to follow the event in the usual course.

[4]                 The plaintiff responds that the defendant was not, or to a large extent was not, the successful party. Although the defendant applied for and obtained an order for security for costs, the order actually made more closely reflected what was sought by the plaintiff.

[5]I set out the costs principles below and then consider the appropriate award.

Relevant cost principles

[6]                 The starting point in any costs decision is r 14.1 of the High Court Rules 2016 which confirms that all matters relating to costs are at the discretion of the Court. The discretion vested by r 14.1 is wide but should generally be exercised subject to the principles in r 14.2. The first principle in r 14.2(1) is that the party who fails should pay costs to the party who succeeds.

1      Grow Build NZ Ltd (in liq) v Timber Cabins Group Ltd [2023] NZHC 2447 at [72] and [73].

[7]The Court of Appeal has confirmed that:2

Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focussing on who initiated what step, and the extent to which that step succeeded or failed.

[8]The remaining principles in r 14.2(1) are:

(b)an award of costs should reflect the complexity and significance of the proceeding:

(c)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:

(d)an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:

(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:

(f)an award of costs should not exceed the costs incurred by the party claiming costs:

(g)so far as possible the determination of costs should be predictable and expeditious.

[9]                 Rules 14.3 to 14.5 provide for the categorisation of proceedings, the appropriate daily recovery rates, and the determination of a reasonable time for each step for the purposes of r 14.2(1)(c) by reference to the time specified for each step in Schedule 3.

[10]              Rule 14.7 provides that, despite rr 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable, including where the party claiming costs, although succeeding overall, has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs, or where some other reason exists which justifies the court refusing or reducing costs, despite the principle that the determination of costs should be predictable and expeditious.3

2      Packing In Ltd (in liq) formerly known as Bond Cargo Ltd v Chilcott (2003) 16 PRNZ 869 (CA) at [6]; and see Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Company Ltd [2020] NZHC 932 at [28]–[29].

3      High Court Rules 2016, r 14.7(d) and (g).

[11]              Finally, r 14.8(1) relevantly provides that costs should be addressed immediately following an opposed interlocutory application, unless there are special reasons to the contrary.

What is the appropriate order?

Submissions

[12]              The defendant submits that a costs award in the defendant’s favour is justified on the following grounds:

(a)The defendant’s application was appropriately made in the circumstances. The defendant wished to have certainty as to security for costs at an early stage of the proceeding, particularly due to the plaintiff’s acknowledged impecuniosity. It now has the certainty that security must be posted, irrespective of the outcome of discovery.

(b)The quantum of security ordered in the judgment well exceeded the sum that was offered by the plaintiff. This is not a case where an offer was made to settle an issue that was akin to a subsequent court-ordered judgment on that issue.

(c)There are no special reasons why the plaintiff should avoid the usual obligation to pay costs on an opposed interlocutory application. In particular, there is no reason to believe that an application for security for costs would not have been required if the question of security had been delayed until after completion of discovery, as proposed by the plaintiff. In correspondence dated 25 January 2023, the defendant (via its solicitors) requested that security be agreed and posted to avoid the costs of a formal application. The plaintiff’s solicitors responded on   7 February 2023, proposing that $5,000 security be posted to enable discovery to occur, at which point the defendant would be free to make an application for security. However, the plaintiff advised that any application for security would “inevitably be opposed”, irrespective of

the outcome of discovery. Given that, the costs of a formal application for security for costs could not have been avoided.

[13]In response, the plaintiff says that:

(a)The plaintiff had submitted that the initial award up to the conclusion of discovery should not exceed the amount that it could pay voluntarily

— $5000, that this submission was successful, and that the plaintiff was able to pay security for discovery.

(b)The plaintiff had further submitted that staged security ought to be ordered. This was opposed by the defendant, but security was ordered on a staged basis.

(c)Finally, the plaintiff had submitted that a total sum of $25,000 was appropriate. The Defendant sought an order for $65,000. The ultimate order for $35,000 was closer to that sought by the plaintiff.

[14]              The plaintiff submits that, fundamentally, the defendant’s position was that the plaintiff’s claim was so devoid of merit that it could effectively be struck out through the security for costs application as evidenced by their application for immediate security in a sum known to be fatal to the claim.

[15]The plaintiff submits that this argument was entirely rejected.

Discussion

[16]              In reaching a view on the security for costs application, I held that the merits of Grow Build’s claim were hard to assess at the time of the application.4 However, I did not consider that the evidence clearly supported the interpretation put forward by the defendant and, in those circumstances, I was concerned to ensure that any security for costs award did not prevent the bringing of the claim by Grow Build.5

4      Grow Build NZ Ltd (in liq) v Timber Cabins Group Ltd, above n 1, at [46].

5 At [51].

[17]              The orders made were to allow the claim to proceed at least to discovery. The first stage of security therefore only required $5,000 to be paid. This was to allow Grow Build to assess its position following discovery. I then ordered two further stages of security to be paid but on the basis that, if the claim proceeded beyond discovery, it was likely to do so with the assistance of a funder.

[18]              If costs are awarded to the defendant on the security for costs application, then it may prevent  the  claim  from  proceeding.  Furthermore,  if,  post-discovery,  Grow Build determines that it ought not to proceed with the claim, then the application for security for costs would have been pointless as Grow Build was prepared to agree to pay $5,000 until discovery in any event. Any concern about delay in applying for security for costs and the impact that might have on the defendant’s application could easily have been explained to the Court if an application had proved necessary.

[19]              The security for costs ordered to be paid at stage two and stage three is relatively modest, being $10,000 by close of pleadings and $20,000 by 15 working days following service of the defendant’s evidence. If the defendant had held off applying for security for costs until after discovery and Grow Build had determined by that stage to proceed with its claim, then Grow Build may have been prepared to agree to those sums. I accept that the plaintiff said in correspondence that any application for security would inevitably be opposed, but that was in response to an amount being sought of $65,000. The amount ordered was significantly less than that.

[20]              In the special circumstances of this case, I therefore continue to consider that it is appropriate for costs to lie where they fall.

Result

[21]                The costs on the defendant’s application for security for costs are to lie where they fall.

Associate Judge Sussock