Hitchcock v Murphy

[2022] NZHC 3542

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-000630

[2022] NZHC 3542

IN THE MATTER OF

Section 146 of the Land Transfer Act 2017

IN THE MATTER OF

Lot 1 on Deposited Plan 512179, Title 788085 (North Auckland Registry)

BETWEEN

STEPHEN LESTER HITCHCOCK

Applicant

AND

SUSAN KERRIE MURPHY

Respondent

Hearing:	(On the papers)
Counsel:	Gregory Thwaite for the Applicant Katie Hogan for the Respondent
Judgment:	19 December 2022

JUDGMENT OF MOORE J

[Costs]

This judgment was delivered by me on 19 December 2022 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

HITCHCOCK v MURPHY [2022] NZHC 3542 [19 December 2022]

Introduction

[1]                 The applicant, Mr Hitchcock, filed but subsequently discontinued an application for leave to lodge a second caveat against property.

[2]                 The respondent, Ms Murphy, seeks costs on a 2B scale basis. Ms Murphy’s position is that she was the successful party; that there was no jurisdiction to lodge a second caveat; and that Mr Hitchcock’s application was duplicative of issues in the substantive proceeding.

[3]                 Mr Hitchcock opposes the application for costs. His position is that he did not fail with respect to the application for leave; rather, the respondent's unilateral act of selling the property precipitated its discontinuation. He says the Court should exercise its discretion to award costs in his favour, alternatively that costs should lie where they fall.

Background

[4]                 Mr Hitchcock and Ms Murphy are siblings. The underlying dispute, which has been afoot since 2019, relates to a 10-acre parcel of land owned by Ms Murphy in Coatesville (“the Property”).

[5]                 Mr Hitchcock has resided at the Property at all material times since 2003. Over this period he has advanced Ms Murphy various sums to put towards the development of the Property, aspects of which he undertook himself, though the basis on which he did so is contested.

[6]                 In 2016, Ms Murphy decided to subdivide the Property into two 5-acre blocks which she would then sell. Mr Hitchcock proposed that the rear 5-acre block be further subdivided into two 2.5-acre blocks, one of which he would acquire.

[7]                 Mr  Hitchcock  maintained  that  Ms  Murphy   agreed   to   this   proposal. Ms Murphy’s evidence was to the effect that she was prepared to explore the possibility, but would only proceed if it would produce the same profit as selling the full 5-acre block.

[8]                 In any event, Mr Hitchcock undertook physical works to enable the subdivision he proposed. In late 2018, Ms Murphy listed the rear 2.5-acre block for sale but there was a lack of interest. She therefore advised Mr Hitchcock that she would revert to the original proposal, being subdivision of the Property into two 5-acre blocks.

[9]                 On 2 May 2019, Mr Hitchcock lodged a caveat against the Property.   On    18 March 2020, Land Information New Zealand issued a notice to lapse the caveat. Mr Hitchcock then applied on 25 March 2020 for an order under s 143 of the Land Transfer Act 2017 that the caveat not lapse.

[10]              Mr Hitchcock claimed that he had an interest in the Property capable of supporting the caveat on several bases. These included an oral agreement for the sale and purchase of part of the Property and a constructive trust arising from contributions he had made to its development.

[11]              This Court dismissed the  application  on  28  August  2020  and  awarded  Ms Murphy $12,229.50 in costs.1 Associate Judge Gardiner held that there was no oral agreement between the parties and that the contributions Mr Hitchcock had made to the Property did not exceed the benefit he received from being able to reside there for at least ten years, rent-free.2 As to the work carried out for the subdivision, this was held to be a debt that Ms Murphy had agreed to repay Mr Hitchcock, rather than a contribution that gave rise to an equitable interest in the land.3 An appeal against the decision was filed but abandoned by Mr Hitchcock. An application to withdraw the notice of abandonment was subsequently dismissed by the Court of Appeal.4

[12]              On 13 November 2020, Mr Hitchcock filed the substantive proceeding against Ms Murphy in which he seeks, inter alia, subdivision and sale to him of a 2.5-acre parcel of the Property and declaration of a constructive trust in respect of that parcel.5 This has yet to be determined.

1      Hitchcock v Murphy [2020] NZHC 2207.

2      At [52] and [60].

3 At [62].

4      Hitchcock v Murphy [2021] NZCA 689.

5      Hitchcock v Murphy HC Auckland CIV-2020-404-2227.

[13]              On 7 December 2020, Mr Hitchcock applied to the Tenancy Tribunal to cancel an eviction notice served on him by Ms Murphy. He abandoned that application on the day of the hearing on 12 July 2021 and was ordered to pay $2,000 to the respondent in costs.6

[14]              On 28 February 2022, Ms Murphy applied for security for costs. This is because Mr Hitchcock, despite demand, had failed to pay the costs awarded against him by Associate Judge Gardiner and the Tenancy Tribunal. Associate Judge Taylor dismissed the application  on  the  basis  that  an  order  for  costs  would  impede  Mr Hitchcock’s ability to pursue claims against Ms Murphy, particularly that relating to debts owed to him.7 The Judge was of the view that this claim was not without merit, whereas uncertainty surrounded the strength of Mr Hitchcock’s claim in respect of an equitable interest in the Property.8

[15]              On 8 April 2022, Mr Hitchcock filed an originating application for leave to lodge a second caveat against the Property. He also sought a declaration that he had a possessory interest in the Property. When the matter was first called on 17 May 2022, Gault J observed that the possessory order sought appeared to duplicate the relief sought by Mr Hitchcock in the substantive proceeding.9

[16]              The matter was next listed for callover on 20 July 2022, with a half-day hearing allocated for 18 August 2022. On 13 July 2022, counsel for the respondent advised the Deputy Judicial Resources Manager that the respondent no longer owned the Property and that the hearing set down for 18 August need not proceed, given that the relief sought by Mr Hitchcock was no longer able to be granted.

[17]              I issued a Minute on 19 July 2022 inviting counsel to file memoranda by  5:00 pm that evening advising the issues on which they considered the Court should be addressed.10 Mr Thwaite, for the applicant, confirmed that “relief [would] have to be found in the other action” and proposed a timetable for the filing of memoranda as

6      Hitchcock v Murphy [2021] NZTT 4285106.

7      Hitchcock v Murphy [2022] NZHC 305.

8 At [63].

9      Hitchcock v Murphy HC Auckland CIV-2022-040-00630, 17 May 2022.

10     Hitchcock v Murphy HC Auckland CIV-2022-040-00630, 19 July 2022 (Minute No 1).

to costs. Mr Thwaite also said that in the event such memoranda were not filed, the case could be “dismissed”.

[18]              I issued a further Minute noting that the proper course would be for the applicant  to  discontinue  the  proceedings,  if   those   were   his   instructions   to Mr Thwaite.11 A notice of discontinuance was filed on 27 July 2022.

[19]              Ms Murphy now seeks costs with reference to rr 14.2 and 15.23 of the High Court Rules 2016.

Relevant law

[20]              Rule 15.23 provides that unless the court orders otherwise, a plaintiff who discontinues a proceeding must pay costs to the defendant of and incidental to the proceeding, up to and including the discontinuance.

[21]              The presumption under r 15.23 may be displaced if, in the circumstances, it is just and equitable to do so.12 In Moodie v Strachan, this Court summarised the law in this area as follows:13

“[15] Displacement of the usual rule (that a discontinuing plaintiff pay  costs) will normally depend on a summary merits assessment where the Court is able to say, in the absence of full trial, that:

(a)Some action on the part of the defendant obviates the necessity for proceeding, thus vindicating the plaintiff's action. An obvious example is where the defendant effectively satisfies the claim by payment, or some other action — although without filing formal confession to judgment.14 Examples include Carmel College Auckland Ltd v North Shore City Council,15 Whiting v Earthquake Commission16 and Ryde v The Earthquake Commission.17

11 Hitchcock v Murphy HC Auckland CIV-2022-040-00630, 19 July 2022 (Minute No 2).

12 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973; and Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782, [2015] NZCCLR 19 at [8].

13 Moodie v Strachan [2015] NZHC 327.

14 See [High Court Rules 2016] r 15.16 (admission of cause of action).

15     Carmel College Auckland Ltd v North Shore City Council HC Auckland CIV-2007-404-5894,  20 January 2009.

16     Whiting v Earthquake Commission [2014] NZHC 1736.

17     Ryde v The Earthquake Commission [2014] NZHC 2763.

(b)Some event beyond the direct control of the parties obviates the continued necessity for proceedings, again vindicating the issue of the proceeding.18

(c)Some other special reason exists why it is just and equitable that the plaintiff not pay costs to the defendant.19”

[22]              As the passage above indicates, the Court will generally not consider the merits of the parties’ respective cases, unless these are so obvious that they should influence costs.20 The Court will, on the other hand, take into account the reasonableness of each party’s stance up to the point of discontinuance.21

[23]              If relying on a change in circumstance that obviated the need for the proceeding, the plaintiff will not be able to rebut the presumption simply by showing that at one point it had reasonable grounds for believing it would succeed. It must be clear that the plaintiff would have succeeded had the circumstances not changed.22

[24]              Under r 14.1, however, the Court maintains a discretion as to costs which can override the principles relating to discontinuance. The general principles relating to the determination of costs also continue to apply, including that the party who fails with respect to a proceeding should pay costs to the party who succeeds.23

Discussion

[25]              I am satisfied that Ms Murphy’s unilateral act in selling the Property amounted to a change of circumstances that obviated the need for the proceeding. Mr Hitchcock could no longer obtain the relief that he sought and therefore discontinued the proceeding. However, in order for the presumption in r 15.23 to be displaced on this basis, I must also be satisfied that Mr Hitchcock would have succeeded in the proceeding but for the sale of the Property.24

18     See for example Body Corporate 81381 v Trebe NZ Ltd (in liquidation) HC Wellington CIV-2003- 485-332, 10 September 2003.

19     See for example Vulcan Steel Ltd v McDermott [2013] NZHC 3232.

20     Kroma Colour Prints Ltd v Tridonicatco NZ Ltd, above n 12; and North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 (HC) at 188.

21     Ryde v Earthquake Commission, above n 17.

22     The Star Trust v Hamilton City Council [2016] NZHC 821 at [10].

23     High Court Rules 2016, r 14.2.

24     The Star Trust v Hamilton City Council, above n 22.

[26]              The possessory order sought by Mr Hitchcock clearly duplicated relief sought in the substantive proceeding and would not have succeeded. As to the application for leave to lodge a second caveat, s 146 of the Land Transfer Act 2017 relevantly provides:

“146    Second caveat against dealings may not be lodged

Unless the court orders otherwise, a caveat against dealings must not be lodged by or on behalf of the same person to protect the same estate or interest as a caveat against dealings that has been removed under section 142 or lapsed under section 141(2)(a) or 143.”

[27]              There is no dispute that the proposed caveat relates to the same interest in land as the first caveat that lapsed under s 143, and that both were lodged by Mr Hitchcock. The question is therefore whether the Court would have granted him leave to lodge a second caveat notwithstanding the default position in s 146. The Court does not tend to do so lightly.25 This is especially so where the Court has dismissed an application for an order that the (first) caveat not lapse, as opposed to the lapse occurring in circumstances where the applicant “slept on its rights”.26

[28]              On a summary view of the merits, I do not consider the Court would have granted Mr Hitchcock leave to lodge a second caveat. First, I note that the applicant effectively seeks to “have a second bite at the apple” by advancing grounds in support of the caveat that either were raised, or could and should have been, before Associate Judge Gardiner in respect of the lapsing of the first caveat.27 Mr Hitchcock abandoned an appeal against that decision and was not permitted to withdraw the notice of abandonment.

[29]              Even putting aside any issues relating to res judicata, however, I am of the view that Mr Hitchcock’s arguments do not establish an interest in the Property capable of supporting a caveat. While there were undoubtedly discussions between the parties as to Mr Hitchcock acquiring a portion of the Property, these fall short of amounting to a binding partnership, contract or trust.

25     Cotton v Keogh [1996] 3 NZLR 1 (CA) at 9.

26     Wei v Du HC Auckland CIV-2011-404-2289, 22 September 2011 at [66].

27     Hitchcock v Murphy, above n 1.

[30]              It follows that I am not satisfied Mr Hitchcock would have succeeded in the proceeding but for the change in circumstance, that is the sale of the Property. Having said this, I consider a 20 per cent reduction in costs payable by Mr Hitchcock to be appropriate given Ms Murphy’s conduct in selling the Property in advance of the hearing date on 18 August 2022. While this may not have been done in bad faith, it was in all likelihood deliberate and executed with the knowledge, if not intention, that it would place the Property outside of Mr Hitchcock’s reach. In my view, it amounts to “some other reason” why it is just and equitable that the applicant does not pay the (total) costs sought by the respondent.28

[31]              The  presumption  in  r  15.23  is  therefore  displaced  to  the  extent  that   Mr Hitchcock, as the discontinuing party, is to pay the costs sought by Ms Murphy less 20 per cent. In the alternative, I exercise my general discretion under r 14.1 to order a 20 per cent reduction in costs payable by the applicant.

Order

[32]I order that Mr Hitchcock is to pay Ms Murphy costs on a 2B scale basis of

$5,736.00.

Moore J

Barristers/Solicitors: Mr Thwaite, Auckland Ms Hogan, Auckland

28     Moodie v Strachan¸ above n 13.