Hobson Views Limited v Hayward
[2020] NZHC 395
•6 March 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-2181
[2020] NZHC 395
BETWEEN HOBSON VIEWS LIMITED
Applicant
AND
OWEN EYRE HAYWARD AND MARY JANE HAYWARD
Respondents
Hearing: (on the papers) Judgment:
6 March 2020
JUDGMENT OF POWELL J
[Costs]
This judgment was delivered by me on 6 March 2020 at 3.30 pm pursuant to R 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
HOBSON VIEWS LIMITED v HAYWARD [2020] NZHC 395 [6 March 2020]
[1] Somewhat unusually, both parties seek costs following resolution of an application to remove a caveat pursuant to s 142 of the Land Transfer Act 2017. Although the proceedings were discontinued both parties claim victory:
(a)Hobson Views Limited (“Hobson”) claim costs on the basis that its application was a necessary push to get Owen and Mary Jane Hayward, to remove a caveat so as to enable Hobson to refinance; whereas
(b)Mr and Mrs Hayward claim costs on the basis Hobson’s application was unnecessary; they had an undisputed caveatable interest and were always prepared to remove the caveat to allow the refinancing once they received information and answers they were seeking from Hobson.
Background
[2] Hobson is the registered proprietor of a leasehold estate in North Auckland (“the property”). Mr and Mrs Hayward are sub-lessees of Hobson under an unregistered railway lease. Mr and Mrs Hayward have a caveat lodged over the property and there is no dispute that their interest is genuine and sufficient to support a caveat.
[3] In September 2019, for financial reasons, Hobson sought to re-finance their mortgage over the property in favour of the Bank of China Limited (“the Bank”). However, due to the presence of the caveat, any refinancing required the consent of the respondent caveators. Hobson sought Mr and Mrs Hayward’s consent, but Mr and Mrs Hayward were unwilling to provide it due to concerns it would be detrimental to their interest in the property.
[4] On 16 September 2019, Mr and Mrs Hayward sought to obtain a copy of Hobson’s financial records but Hobson informed Mr and Mrs Hayward this was not an appropriate request and declined to provide the information. Similarly, on 20 September, Mr and Mrs Hayward asked to sight the mortgage documents but again Hobson informed Mr and Mrs Hayward that this was an inappropriate request.
[5] On 23 September, consent had still not been provided and counsel for Hobson informed Mr and Mrs Hayward that High Court proceedings would be initiated if they continued to withhold their consent.
[6] On 24 September, Mr and Mrs Hayward wrote to Hobson seeking an “insurance” from the Bank that it recognised their lease and that the lessee’s position would be protected in the event of default by the mortgagor. Mr and Mrs Hayward also sought to view the loan terms if “commercial reality” would allow it. Hobson responded by informing Mr and Mrs Hayward that s 145 of the Land Transfer Act 2017 applied and provided for the ongoing protection of the rights of the caveators.
[7] On 26 September, counsel for Mr and Mrs Hayward wrote to Hobson advising that Mr and Mrs Hayward were prepared to sign the consent form on receipt of confirmation from the Bank acknowledging the respondent’s unregistered interest.
[8] On 14 October 2019, the application to remove the caveat was filed by Hobson and on 16 October, counsel for the Bank informed Mr and Mrs Hayward that if they were to take any action under the mortgage it would be subject to the terms of Mr and Mrs Hayward’s lease.
[9] Following this statement from the Bank Mr and Mrs Hayward consented to the refinancing.
[10]On 18 October 2019, the application for removal of the caveat was withdrawn.
Hobson’s claim for costs
[11] Mr Thompson, for Hobson, contends Hobson is entitled to costs. He says that despite the fact the substantive application was not determined by the Court, Hobson ought to be considered the successful party as Mr and Mrs Hayward’s consent to the refinancing was a direct response to the application for removal of the caveat. He also says that had the Court been required to decide the application it probably would have decided in favour of Hobson as it was entirely unreasonable for Mr and Mrs Hayward to withhold their consent. In these circumstances, Mr Thompson says Hobson is
entitled to indemnity costs. In the event the Court is unwilling to award indemnity costs Hobson seeks costs on a 2B basis with a 50 per cent uplift.
Mr and Mrs Hayward’s claim for costs
[12] Mr Webb, for Mr and Mrs Hayward, seeks costs on the basis that the application to remove the caveat had no prospect of success and was entirely unnecessary as it was only filed after Hobson failed to respond to Mr and Mrs Hayward’s requests for an assurance from the Bank. Mr Webb denies any allegation that Mr and Mrs Hayward delayed providing their consent, rather, he submits that any delay was caused by Hobson who did not provide Mr and Mrs Hayward with the information requested until after the application for removal had been filed.
[13] Mr Webb notes that it is surprising Hobson has sought costs and that the orthodox position where an application is withdrawn, is that costs will follow the event. Mr Webb submits that it is not Mr and Mrs Hayward who acted unreasonably but Hobson, and that indemnity costs should be awarded in favour of Mr and Mrs Hayward. In the alternative, Mr Webb seeks costs on a 2B basis with an uplift of 50 per cent.
Relevant legal principles
[14] The High Court Rules 2016 provide that where a party unilaterally discontinues a proceeding that party must pay costs.1 This position is to reflect that the party has been unsuccessful. However, where, as here, the parties have filed a joint memorandum informing the Court that the matter has been resolved, the default position in r 15.23 does not apply, with standard costs rules applying instead.2
[15] As a result, the fundamental principle applicable in this case is that costs should follow the event,3 and therefore the loser should pay the winner’s costs.4 The primacy
1 Rule 15.23.
2 See Ng v Pauatahanui GS Ltd [2014] NZHC 3397 where this Court declined to apply r 15.23 where the proceedings were dismissed by consent order.
3 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].
4 Rules 14.2 – 14.5.
of this rule has been expressed by the Supreme Court in many different ways but perhaps most clearly and concisely as “the loser, and only the loser, pays”.5 This fundamental rule, although not absolute, ought only be departed from for exceptional reasons.6 The difficulty comes when a clear winner cannot readily be identified as is the case where the substantive matter before the Court was not determined. Where this is the case the following four principles have typically been applied by the Courts:7
(a)The court has power to make a costs order when the substantive proceedings have been resolved without trial but the parties have not agreed on costs. There is no tradition of “no order as to costs” merely because a dispute has been settled except as to costs. That said, if it is not possible for the Judge to say what the likely outcome would have been, that in itself is a possible order.
(b)The overriding objective is to do justice between the parties without incurring unnecessary court time and consequent additional costs.
(c)At each end of the spectrum will be cases where the merits and likely successful party will be obvious. In between, to differing degrees, there will be cases that are less clear. How far the court will be prepared to inquire into the unresolved substantive issues will depend on the circumstances of the case.
(d)In the absence of a good reason to make any other order the fall-back position is to make no order as to costs.
[16] Accordingly, the question in this case is whether the outcome concerning the application for the removal of Mr and Mrs Hayward’s caveat can be “confidently predicted”8 on the papers, without an examination of the merits. If not, and the outcome of the matter remains unclear, it will be improper and inefficient for this Court to inquire into the unresolved substantive issues. In those circumstances costs appropriately lie where they fall.
5 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].
6 At [19].
7 Byrne v Rose [2017] NZHC 2886 at [14] citing Ng v Pauatahanui GS Ltd [2014] NZHC 3397 at
[7] – [11] where MacKenzie J referred to three English authorities: Brawley v Marczynski (No 1) [2002] EWCA Civ 756, [2003] 1 WLR 813; BCT Software Solutions Ltd v C Brewer & Sons Ltd [2003] EWCA Civ 939, [2004] FSR 150; Venture Finance Plc v Mead [2005] EWCA Civ 325, [2006] 3 Costs LR 389.
8 See Ng v Pauatahanui GS Ltd [2014] NZHC 3397 at [7] where MacKenzie J outlines the position to be as follows: where there is no determination on the substantive proceeding “it is generally inappropriate for the parties to agree on settlement terms which require the Court to fix costs, except in cases where the outcome of the matter had proceeded to trial can be confidently predicted from the papers, without an examination of the merits.”
Discussion – could the outcome have been confidently predicted?
[17] Where an application is made to remove a caveat pursuant to s 142 of the Land Transfer Act 2017, the onus will be placed on the caveator to show they have a reasonably arguable case to sustain the caveat.9 If a caveator does not establish a reasonably arguable case the caveat will be removed. If the caveator does establish a reasonably arguable case, the caveat will be sustained unless the Court exercises its residual discretion to remove the caveat. This residual discretion is to be exercised cautiously and only where the Court is completely satisfied the legitimate interests of the caveator will not be prejudiced.10 If, on the facts of the case, it is evident the caveator can obtain no benefit from the maintenance of the caveat, or if the caveator’s interests can be reasonably accommodated in some other way, then it may be appropriate the caveat be removed notwithstanding the caveator’s claimed interest is beyond dispute.11 The residual discretion to remove a caveat may also be exercised where the caveator behaves in a way that is so unreasonable that they appear to be using the caveat for a motive beyond the genuine protection of their interest in the land.12
[18] In the current case it was conceded by Hobson that the respondent had a legitimate interest in the property that was capable of sustaining a caveat. Thus, if the matter had been heard, Mr and Mrs Hayward would have been able to illustrate they possessed a reasonably arguable interest in the property. As such, it then would have fallen back on Hobson to show the Courts’ residual discretion ought to be exercised despite the presence of a legitimate interest. It is here where the issues arise. On the one hand, Mr and Mrs Hayward were unlikely to be substantially prejudiced by the removal of their caveat. The removal could have been granted subject to the condition that Mr and Mrs Hayward have leave to apply for a second caveat after the refinancing had gone ahead. But on the other hand, Mr and Mrs Hayward had a genuine interest in the land that they wished to protect, and they were entitled to make reasonable
9 Sims v Lowe [1988] 1 NZLR 656 at 660 (CA).
10 Pacific Homes Ltd (in Receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
11 At 656.
12 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA).
requests for assurance and/or information they deemed necessary before consenting to the refinancing.13
[19] Having regard to the conduct of both parties, and noting that ultimately agreement was reached, I cannot say with certainty that Mr and Mrs Hayward acted so unreasonably that their conduct ought to be viewed as going beyond the genuine protection of their interest in the property, or that Mr and Mrs Hayward’s interests would not have been prejudiced by the removal of the caveat. In these circumstances, without full argument on the matter and without the substantive proceeding being determined by this Court, it is unclear which party would have prevailed had the application proceeded to a hearing. In other words, the matter was finely balanced and could not be “confidently predicted” on the papers. As such, I conclude it is appropriate for costs to lie where they fall.
Result
[20] The applications for costs by both Hobson and Mr and Mrs Hayward are dismissed. Costs are to lie where they fall.
Powell J
13 It is noted that s 145 of the Land Transfer Act 2017 provides that consent to the registration of an instrument by the caveator “is subject to the rights of the caveator” but a caveator is surely able to confirm that all parties are clear on what those rights are.
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