Huakiwi Copenhagen Lot 4 Orchard Ltd v Te Moana
[2019] NZHC 1582
•9 July 2019
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2019-470-4
[2019] NZHC 1582
BETWEEN HUAKIWI COPENHAGEN LOT 4 ORCHARD LIMITED
ApplicantAND
TEIWIMAHUE PEWHAIRANGI TE MOANA
First Respondent
WHARE TIKIHANA TE MOANA
Second RespondentTE RUHI MONI TE MOANA
Third RespondentHINEWHARE ANI WOLFERSTAN
Fourth Respondent
Hearing: On the papers Appearances:
J Hakaria for Applicant
M Anderson for Respondents
Judgment:
9 July 2019
JUDGMENT OF LANG J
[on costs]
This judgment was delivered by me on 9 July 2019 at 11 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
HUAKIWI COPENHAGEN LOT 4 ORCHARD LTD v TE MOANA [2019] NZHC 1582 [9 July 2019]
Introduction
[1] The plaintiff, Huakiwi Copenhagen Lot 4 Orchard Ltd (Huakiwi), leased an orchard from the four respondents under a lease agreement dated 1 July 2008. It operates a kiwifruit orchard on the leased property.
[2] On 25 January 2019 Davison J granted a without notice application by Huakiwi seeking interim orders restraining the respondents from acting further on a purported termination of the lease by the respondents.1 The orders also required the respondents to continue to allow Huakiwi to have access to the land and prohibited them from interfering with the operation of the kiwifruit orchard on the property.
[3] It was subsequently necessary for Huakiwi to apply for arrest orders against the respondents because they were failing to comply with the interim orders made on 25 January 2019. Common sense subsequently prevailed, however, and by 21 May 2019 Huakiwi no longer required arrest orders to be made. Van Bohemen J dismissed the application seeking arrest orders in a Minute issued on that date.
[4] The only remaining issue relates to the costs payable in relation to the application. The file has been referred to me as Liaison Judge for the Waikato/Bay of Plenty region to determine that issue on the papers.
Background
[5] The respondents purported to terminate the lease by email sent to Huakiwi on 8 January 2019. The email stated that the lease was terminated because the orchard was in great neglect and PSA was rampant on the property.
[6] Several events that occurred after that date demonstrated that the respondents were proceeding on the basis that the lease was no longer in existence. This prompted Huakiwi to apply for the interim orders that Davison J made on 25 January 2019.
[7] The first respondent, Mr Teiwimahue Te Moana, was the spokesperson for the respondents and was served with the interim orders on 26 January 2019. Over a period
1 Huakiwi Copenhagen Lot 4 Orchard Ltd v Te Moana [2019] NZHC 26.
of four days from 29 January 2019 to 1 February 2019 the respondents acknowledge Mr Teiwimahue Te Moana breached the interim orders on several occasions:
(a)On 29 January 2019 the gate to the orchard was chained and locked shut, requiring Huakiwi’s orchard workers to cut the chain in order to enter the property. Huakiwi contends Mr Teiwimahue Te Moana met the workers at the gate, directed verbal abuse toward them and attempted to cut the valve off a tyre of one of the workers vehicles. The respondents deny any confrontation occurred and say they alerted the police to the situation that had developed.
(b)On 30 January 2019 the gate was chained and locked again and the water supply, the tap for which is located on Mr Teiwimahue Te Moana’s adjacent property, was turned off. The respondents accept this occurred but point out that, although the lease permits the lessee to have access to water on the leased land, it does not provide for the lessee to have access to water supply on other land.
(c)On 31 January 2019 Huakiwi’s staff were required to cut the chain on the gate to the orchard again to allow a contractor to mow the grass in the orchard. Huakiwi says Mr Teiwimahue Te Moana entered the orchard and told the mowing contractor to leave, and the contractor obeyed this instruction. The respondents say Mr Te Moana had a discussion with the mowing contractor and said that, if he was making the decision, he would not mulch material on the ground in the orchard until PSA infected offcuts had first been removed. He then asked the contractor to defer mowing the property until the following day, when he had arranged for an expert to inspect the property and provide advice as to the level of PSA present on the property.
(d)On 1 February 2019 Huakiwi says Mr Teiwimahue Te Moana again entered the orchard and ordered Huakiwi’s orchard workers to leave, and they subsequently did. The respondents say it was at this point that they received expert advice that, although PSA was present in the
orchard, it was at an acceptable level. Thereafter they did not attempt to hinder Huakiwi’s orcharding operations any further.
The arguments
[8] Huakiwi seeks costs on an indemnity basis against each of the respondents jointly and severally in regard to the application for arrest orders made by Huakiwi. Huakiwi claims $11,109.58 as being the costs and disbursements it incurred between 29 January 2019 and 11 February 2019 in seeking arrest orders.
[9] Huakiwi claims indemnity costs pursuant to r 14.6(4)(b) of the High Court Rules 2016, which provides that such costs may be ordered where a party has ignored or disobeyed an order or direction of the court. Huakiwi contends the respondents repeatedly and deliberately disobeyed the interim orders made on 25 January 2019, and this justifies an order for indemnity costs.
[10] The respondents submit that an award of costs is inappropriate in the circumstances. They do not dispute that they breached the interim orders made by Davison J, but they say they were motivated in doing so by a desire to protect the health of their property. The respondents were concerned with the level of PSA in the orchard and also with the presence of noxious weeds. As soon as their expert confirmed on 1 February 2019 that PSA was not a threat to the orchard the respondents removed all padlocks and chains and did not breach the interim orders again.
[11] The respondents also contend that provisions in the lease agreement make an award of costs inappropriate. They say Huakiwi breached clause 8 of the lease agreement by failing to take all reasonable steps to keep the leased land clear of noxious weeds. By applying for the arrest orders Huakiwi breached clause 20, which required disputes under the lease to be submitted to arbitration. They also point out that clause 18(b) of the lease agreement requires the lessee to pay all costs for which the lessor becomes liable as a consequence of any breach of the lessee’s covenants. The respondents argue that the presence of the noxious weeds and PSA prompted the actions that breached the interim orders. They say Huakiwi is liable under the lease for any costs incurred by the respondents as a result.
[12] In the alternative, the respondents submit that, if the court is prepared to grant Huakiwi costs, these should not be awarded on an indemnity basis. Rather, the respondents submit that scale costs on a 2B basis are appropriate. This would amount to the sum of $6,021.00 together with disbursements. An award of costs at that level would reflect the fact that the respondents were motivated by genuine concerns regarding the physical wellbeing of the orchard. It would also recognise that the breaches occurred over a short period of time and did not seriously affect Huakiwi’s ability to continue with work on the orchard during that period.
Relevant principles
[13] Although matters relating to costs remain at the discretion of the Court,2 the Court must exercise its discretion on a principled basis. To the forefront of these is the principle that the unsuccessful party must pay costs to the successful party.3
[14] In Bradbury v Westpac Banking Corporation the Court of Appeal summarised the distinction between standard scale costs, increased costs and indemnity costs as follows:4
(a)Standard scale costs apply by default where cause has not been shown to depart from the scale;
(b)Increased costs may be ordered where there is failure by the paying party to act reasonably;
(c)Indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[15] Rule 14.6(4) provides that the Court may order a party to pay indemnity costs if the party has “ignored or disobeyed orders or directions of the Court”. To justify an order for indemnity costs the misconduct must be “flagrant” and, as such, indemnity costs are to be “exceptional and require exceptionally bad behaviour.”5
2 High Court Rules 2016, r 14.1(1).
3 High Court Rules, r 14.1(2)(a).
4 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [28].
5 At [28].
[16] Where the breach of a court order constitutes contempt of court, it will often justify indemnity costs being awarded against that individual. 6 Contempt of court will be evident where the terms of the court order were clear, unambiguous and binding on the party, and the party deliberately acted in breach of those terms after having received proper notice of them (normally as a result of personal service).
[17] Counsel referred me to several cases where indemnity costs have been awarded in such circumstances. In Qu v Zeng, indemnity costs were awarded where the defendants breached a court order by failing to file an affidavit for 22 months, and by the deliberate infringement of freezing orders.7 The Court was satisfied these breaches were compounded by the presence of ongoing and new breaches that occurred after service of further orders. This amounted to flagrant misconduct justifying an award of indemnity costs.8
[18] In Solicitor-General of New Zealand v Krieger, the defendant published information in breach of a court order and, over a period of months, continued to threaten the publication of further information. He also attacked the independence of the judges involved with the case.9 In awarding indemnity costs Panckhurst J observed that it would be “difficult to imagine more obvious and wilful disobedience of Court orders…”. 10
Decision
[19] I do not accept the respondents’ technical argument based on the provisions of the lease. First, the existence of an arbitration clause in the lease is no barrier to Huakiwi applying for interim relief.11 Davison J dealt with that issue in some detail when he granted the interim orders.12 Secondly, the respondents have not yet established that Huakiwi was in breach of the terms of the lease. Thirdly, the application for arrest orders became necessary because the respondents breached the terms of the court orders. This did not trigger Huakiwi’s obligation under the lease to
6 Burmester v Burmester [2019] NZHC 32 at [23].
7 Qu v Zeng [2018] NZHC 1355.
8 At [121].
9 Solicitor-General v Krieger [2014] NZHC 744.
10 At [8].
11 Arbitration Act 1996, Sch 1, cl 9.
12 Huakiwi Copenhagen Ltd 4 Orchard Ltd v Te Moana above n 1, at [24]-[30] and [37].
reimburse the respondents for any costs they might incur as a result of Huakiwi breaching the terms of the lease.
[20] Turning to the substance of the argument, the starting point must be the fact that Mr Teiwimahue Te Moana deliberately hindered Huakiwi’s ability to conduct its orcharding operations on the leased land for a period of several days. In doing so he clearly breached the interim orders made on 25 January 2019. He did so knowingly because he was personally served with those orders on 26 January 2019. He therefore deliberately acted in breach of the interim orders and in doing so engaged in contemptuous conduct.
[21] This is not the end of the matter, however, because contemptuous conduct will not invariably result in an award of indemnity costs. In the present case I accept that the factors pointed to by the respondents bring their conduct slightly below that necessary to justify an award of indemnity costs. These include the fact that I accept the respondents were motivated by genuine concerns for the physical wellbeing of the orchard and the fact that the breaches occurred over a relatively short space of time. Furthermore, whilst they caused considerable inconvenience to Huakiwi, the breaches do not appear to have caused it serious or lasting harm.
[22] Equally, however, the respondents breached the interim orders on several occasions and behaved unreasonably in doing so. With the benefit of hindsight they should not have attempted to deny Huakiwi access to the property before they had obtained advice from their expert. Had they taken that step, Huakiwi would not have been required to apply for the arrest orders. Furthermore, in terms of r 14.6(3)(i), the respondents contributed unnecessarily to the time and expense of the proceeding by failing to comply with the interim orders and thereby creating the need for Huakiwi to apply for those orders. The additional time and expense resulting from the application are thus of the respondents’ making. I therefore consider an increase in costs to be appropriate.
[23] In Holdfast NZ Ltd v Selleys Pty Ltd, the Court of Appeal found that an increase of 50 per cent on scale costs provided a fair recovery of costs for the step unnecessarily forced upon the cost-claiming party, assuming that the time allocated to the step had
been reasonably calculated.13 The Court indicated, however, that this did not mean an uplift of more than 50 percent could never be justified.14 This point was affirmed in Mueller v Hendren, where an uplift of 75 percent was awarded where the grounds for indemnity costs had been established but, in exercising the courts discretion, a lesser award was warranted.15
[24] I consider that this is a case where an uplift of more than 50 per cent is justified. Although the breaches of the interim orders fall short of the threshold justifying indemnity costs, Huakiwi needs to have fair recovery for the unnecessary expense to which it has been put.
[25]I therefore consider an uplift of 75 per cent on scale costs is appropriate.
Result
[26] The respondents are to pay Huakiwi’s costs together with disbursements as fixed by the Registrar in relation to the application for an arrest order. Costs are to be calculated on a category 2 Band B basis, and are to be increased by 75 per cent in relation to all steps taken up until 11 February 2019.
Lang J
13 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47] – [48].
14 At [47] – [48].
15 Mueller v Hendren (2009) 19 PRNZ 432 (HC).
10
5
1