Hosken v Wu

[2013] NZHC 2419

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-000482 [2013] NZHC 2419

BETWEEN

STEPHEN GEORGE HOSKEN and JANNE ELIZABETH HOSKEN

Plaintiffs

AND

DINGSHAN WU

Defendant

Hearing:	On the papers
Appearances:	G Satherley for Plaintiffs SJ Neville for Defendant
Judgment:	16 September 2013

JUDGMENT (NO. 3) OF TOOGOOD J [COSTS]

Thisjudgment was delivered by me on 16 September 2013 at 4:45 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

HOSKEN v WU [2013] NZHC 2419 [16 September 2013]

[1] In this proceeding I delivered two judgments,[1] the effect of which was to interpret a restrictive covenant applying to the defendant’s West Harbour property in a manner which meant that the defendant was in breach for allowing a substantial number of queen palm trees on his property to block the plaintiffs’ view of the sea and Auckland City on the far horizon. I ordered the defendant to rectify the breaches except in relation to a group of five palms adjacent to the south-east boundary of the defendant’s property.  In respect of those trees, I assessed the plaintiffs’ damages at

$18,000 and gave the defendant the option of removing the five trees or paying the damages sum to the plaintiffs.

[1] Hosken v Wu [2013] NZHC 1506 (“the first judgment”) and Hosken v Wu [2013] NZHC 1756 (“the second judgment”).

[2] The plaintiffs now claim indemnity costs of $92,814.34 plus experts’ fees and other disbursements or, alternatively, scale costs calculated on a category 2C basis up to the level of the plaintiffs’ actual costs as stated.

Background

[3] The central factual dispute between the parties related to what the plaintiffs argued was an obvious drafting error in the restrictive covenant which was indisputably intended to restrict the height of buildings and trees on the defendant’s property to protect the sea and city views of the owners of other properties in the subdivision. The covenant applicable to the defendant’s property described the height restriction as being at 22.0 m “from DOSLI Datum 1949” which is a horizontal reference point for the construction of buildings and which was meaningless in a covenant intended to impose a vertical restriction. The plaintiffs argued, and I held, that the DOSLI reference was intended to be, and should be interpreted as, a reference to “DOSLI Datum 1946”.  I also held that, if necessary, I would have granted the plaintiffs equitable rectification of the covenant imposed for their benefit.

[4]      In support of their costs application, the plaintiffs argue:

(a)The defendant’s argument that the meaning of the restrictive height covenant could not adequately be determined for enforcement purposes lacked merit and it was unreasonable of the defendant not to accept the plaintiffs’ legal and factual arguments to the contrary.[2]

[2] High Court Rules, r 14.6(3)(b)(ii) and (iii).

(b)The defendant failed, without reasonable justification, to accept an offer of settlement made by the plaintiffs prior to trial.[3]

[3] Ibid r 14.6(3)(b)(iv).

(c)The defendant acted vexatiously in defending the proceeding and other reasons exist justifying increased costs.[4] The other reason relied upon is that the defendant’s daughter made an application to the Auckland Council for heritage tree protection in respect of the offending palm trees indicating, the plaintiffs argue, that the defendant was  aware  the  covenant  was  enforceable  and  that  there  was  an

[4] Ibid r 14.6(4)(a) and (f).

intention to thwart the plaintiffs’ attempts to have the trees removed.

(d)Standard 2B scale costs “are not appropriate given the diverse range of expert evidence and issues that needed to be briefed and covered in the two day hearing.”

Unreasonable defence to plaintiff ’s interpretation of covenant?

[5] As to the defendant’s failure to acknowledge the clerical error in  the description of the restrictive covenant, Mr Satherley submitted for the plaintiffs that the defendant’s failure had a major impact on the course of the dispute and that, without acceptance from the defendant that the covenant was enforceable, any attempt at resolving the matter without litigation was doomed.  He argued that the

defendant’s unreasonable attitude meant that the proceedings themselves should not have been necessary and were unnecessarily prolonged.

[6]  While it is true that the defendant did not concede that the DOSLI reference was an error, Ms Neville did not argue strongly to the contrary. The thrust of the defendant’s case, directed to the question of whether any relief should be afforded to the plaintiffs, was that the defendant could not reasonably have been aware of the implications of the height restriction when he purchased the property at a time when the offending palm trees were already at a considerable height. The evidence and counsel’s submissions also focused on the measure of damages, if any, which should be awarded to the plaintiffs; whether or not the defendant was ordered to rectify any breach of the covenant properly interpreted or rectified; and, as a matter going to the Court’s discretion, the likely cost of removal and replacement of the offending trees and the consequences for the defendant and other residents of the neighbourhood.

[7] In the circumstances, although I had no difficulty coming to the view that a clerical mistake had been made and the covenant ought to be enforced as intended, I am not persuaded that the hearing was made necessary, nor prolonged appreciably, by an unreasonable failure on the part of the defendant to make a formal concession to that effect.

Pre-trial settlement efforts

[8] I have been provided with copies of correspondence, principally from the plaintiffs to the defendant or his solicitors, indicating that the plaintiffs attempted on seven occasions between April 2011 and December 2011 to persuade the defendant to settle by reaching agreement on the removal of the offending trees, and that there was  further   correspondence   between   the   parties   between   11 July 2012   and 5 September 2012 in which ‘without prejudice’ settlement proposals and counter- proposals were made.

[9] The plaintiffs’ early letters seeking settlement were founded on the proposition that the allegedly offending trees were higher than 22.0 m above the DOSLI Datum 1949, the erroneous datum reference.  There was limited engagement

between the parties on those approaches, in which the plaintiffs did not make any proposals for settlement other than to demand that all trees on the defendant’s property be reduced to a height of 22 m or less above the quoted DOSLI datum. The plaintiffs maintained  this  position  up  to  the  time  they  issued  proceedings  on 3 February 2012 seeking summary judgment.

[10] On 20 April 2012, representing himself, the defendant filed a statement of defence. On 10 May 2012, Abbott AJ noted that there appeared to be a significant legal issue as to the defendant’s ability to comply with the terms of the covenant as then alleged, because of the potential argument that the trees were “fully protected”.

[11]     On 25 May 2012, by which time the defendant was represented by solicitors, a notice of opposition to summary judgment was filed asserting that the defendant had an arguable defence to the plaintiffs’ claim including an allegation that the covenant which the plaintiffs sought to enforce was void on the grounds of uncertainty; that the purpose of the covenant was not to protect the plaintiffs’ view but to ensure the high standard of the dwellings to be erected in the subdivision; that delay on the part of the plaintiffs disqualified them from relief; there were difficulties for the defendant in complying with the orders sought on account of planning considerations; and generally that granting the relief sought would be inequitable.

[12] In a memorandum dated 5 June 2012, Mr Satherley for the plaintiffs acknowledged that the matter was “no longer” suitable for summary judgment. In their amended statement of claim filed on 5 June 2012, the plaintiffs first pleaded the clerical error in the drafting of the covenant. They sought equitable rectification; orders requiring the defendant to remove any trees in breach of the covenant as rectified; damages; and other consequential orders.

[13] The defence to the amended claim was filed on 19 June 2012. In it the defendant argued that the covenant was void for uncertainty and,  alternatively, argued that it was not equitable for the Court to order rectification. The defendant also argued that the plaintiffs had delayed unreasonably; that reducing the height of the trees would destroy them; that the removal would require a non-complying activity resource consent; and, further, that it would be inequitable to grant injunctive

relief as sought because of the effect of removal of the trees on the neighbourhood as a whole.

[14] I am satisfied that up to that point, at least, the defendant was entitled to take the view that he had an arguable defence to the plaintiffs’ proposition that all of the trees which the plaintiffs claimed were in breach of the covenant should be removed and that the defendant did not act unreasonably in resisting the plaintiffs’ settlement overtures.

[15] Furthermore, I am also satisfied that this was never a proceeding which was amenable to summary judgment, given that the claim was based on a false premise as to the enforceability of the covenant as originally worded, and the subsequent recognition by the plaintiffs in their amended statement of claim that they needed to seek rectification in order to have an enforceable covenant. Rectification is an equitable remedy and the plaintiff’s were bound to acknowledge that, from the time the amended statement of claim was filed, the defendant had at least an arguable defence to the claim.

[16] On 11 July 2012, after the pleadings were settled, the plaintiffs made a settlement offer, acceptance of which would require the defendant to remove all but four of the palm trees on his property, the remaining four trees to be selected by the plaintiffs, together with a payment of $30,000 which was the amount of the legal fees and costs the plaintiffs said they had incurred up to that date. The parties then continued to engage each other in without prejudice settlement correspondence, in the course of which the plaintiffs notified the defendant that their claim for damages due to a reduced value of the plaintiffs’ property “caused by the Queen palm trees at 19 and 21 Courtneys”, had been calculated at $400,000. The plaintiffs did not indicate what proportion of that loss in value was attributable to the trees on the defendant’s property at 19 Courtneys, and what proportion was attributable to allegedly offending trees on the neighbouring property (owned by a Mr Patel) at 21 Courtneys.  Mr Patel was not a party to the proceeding.

[17] The defendant’s response indicated that a valuer engaged by him had placed the  loss  at  less  than  ten  percent  of  the  $400,000  sought  by  the  plaintiffs.

Nevertheless, the defendant made an offer to remove all palms which had crowns above the roofline of his property, save for a group of palms at the rear of the property abutting the fence of 17 Courtneys and one further palm tree “close to the main dwelling located at the corner and surrounded by two external walls”. The defendant undertook to meet the cost of a resource consent if one was necessary to remove those trees and offered a contribution of $4,975 by way of costs on a category 2B basis for the filing of briefs of evidence. Thereafter, the plaintiffs accepted the defendant’s proposals as to the removal of trees but continued to maintain a substantial claim for costs and noted that they were continuing to seek damages.

[18] The correspondence immediately prior to the commencement of the hearing focused very much on the different positions taken by the parties with regard to the proper award of costs to the plaintiffs.

[19] I am not persuaded, in these circumstances, that the defendant failed without reasonable justification to accept the plaintiffs’ settlement proposals.

Defence vexatious and other reasons to justify increased costs

[20] I am not persuaded either that the defendant acted vexatiously in defending the proceeding. I was satisfied that the plaintiffs were correct to argue that a proper interpretation of the covenant, acknowledging the clerical error, required the covenant to be the subject of an implicit rewording and that equitable rectification would otherwise have been appropriate. However, the plaintiffs sought equitable relief which inevitably required a balancing of the effects on the plaintiffs of the breaches of covenant against the assessed costs and other implications of removal for the defendant. An assessment was also required to be made of the loss of value of the plaintiffs’ property attributed to the defendant’s breaches. After hearing the evidence from the parties’ valuers, I tended to favour the approach taken by the defendant’s valuer, as demonstrated by my discussion of the valuation evidence at [49]-[55] of the first judgment of 20 June 2013.

[21] In all of the circumstances, it would not be appropriate to regard the defendant’s position at trial as vexatious.

[22]     The heritage protection order made by the Council in respect of the trees was a matter raised by the defendant as being relevant to the issue of what relief the Court could or should provide to the plaintiffs in the event that the defendant was held to be liable. After judgment in the case was reserved following the hearing, I was informed by counsel for the plaintiffs that the heritage protection order had been removed by the Council following an application by the plaintiffs which had been referred to at the hearing. Ms Neville, for the defendant, did not object to my being provided with that post-hearing information and, realistically, accepted that the former existence of the order no longer had any relevance to the issue of remedies.

[23] I agreed with Ms Neville on that point and, further, considered that the application for the heritage protection order and the making of it was not relevant to any of the issues I had to decide as to liability as well as remedy.  For those reasons, I made no reference to the matter in my judgments.

[24] While there is no doubt that the actions taken by the defendant’s daughter to secure heritage protection for the trees was intended to protect the trees  from removal in the face of threatened litigation seeking orders to that effect, the decision to grant heritage protection was not that of the defendant but of the Council’s relevant officers. As I have observed, in any event, the issue was resolved administratively and had no bearing on the outcome of the plaintiffs’ claim.

[25]     I do not  think an order  for increased costs  is  justifiable under either  of r 14.6(4)(a) or (f).

Should there be a departure from standard 2B scale costs?

[26] The plaintiffs’ claim for costs calculated on a 2C basis assumes that the case involved “a comparatively large amount of time” for the steps taken. I acknowledge that this was not a straightforward case and that is reflected by categorising the proceeding as a category 2 proceeding, namely, one of average complexity requiring

counsel of skill  and  experience  considered  average  in  the  High  Court.  Both Mr Satherley and Ms Neville are experienced counsel who conducted their cases both as to evidence and legal argument with considerable skill but I am not persuaded that the proceeding was one which was of such complexity or significance as to “require counsel to have special skill and experience in the High Court”.[5]

[5] The test for categorisation in r 14.3(1).

[27] Ms Neville suggested that costs for the preparation of the plaintiffs’ briefs of evidence should be calculated on a category 2A basis rather than 2B because the plaintiffs did little more than reproduce reports the cost of which are covered by the disbursements claim. This is a matter on which I am not able to adjudicate and I am not prepared to ascribe a different category for those individual steps.

[28] I consider that the proceeding should be categorised for all purposes as a 2B proceeding, for which the daily recovery rate for steps taken up to and including 13 June 2012 is $1,880 and for all steps taken from 14 June 2012 is $1,990.[6]

Different calculations by counsel

[6] High Court Amendment Rules 2012 (SR 2012/93), r 4.

[29]   Calculating all costs items on a category 2B basis, with the commencement of the proceeding by the plaintiffs being calculated at the lower daily rate and all other steps calculated at the higher rate, Ms Neville calculates that the plaintiffs’ total entitlement to costs is $30,316  on  the  basis  of  steps  totalling  15.5  days. Mr Satherley submits that the calculation should be based on a total of 19.7 days. The differences between counsel relate to additional claims by the plaintiffs in respect of the filing of case management or mention memoranda; an appearance at a case management conference; and allowances for listing and inspecting documents. I am unable to reconcile these competing claims on the information available to me and in those circumstances I leave it to counsel to do so.

[30] Ms Neville submits that the costs  calculation  according  to  the  schedule should be reduced on the basis that the plaintiffs made reasonable settlement offers as to costs, but I am not persuaded that there is a proper basis for reducing the

amount of the plaintiffs’ claim from that calculated in accordance with the schedules, given that their actual and reasonable costs far exceed the amount payable according to those calculations.

[31] In the circumstances, the plaintiffs are entitled to costs for all schedule items properly claimable (as agreed by counsel) on a category 2B basis, applying the applicable daily rates prior to and after 14 June 2012, together with disbursements as claimed.

Defendant’s claim for costs on abandoned summary judgment application

[32] I accept, however, that the defendant is entitled to an allowance for costs on the summary judgment application which, as I have indicated, was bound to fail. Ms Neville’s assessment of the defendant’s costs claim on a category 2B basis is three days at $1,880 a day and I allow that sum.

[33]     Result

[34] In those circumstances the net costs payable by the defendant to the plaintiffs shall be the sum calculated by reference to [31] above, less the sum of $5,640 which the plaintiffs would otherwise pay to the defendant in respect of the abandoned summary judgment application.

......................................

Toogood J