Intop Homes Limited v Lot 77 Limited

[2023] NZHC 3057

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-640

[2023] NZHC 3057

UNDER

Land Transfer Act 2017 section 143.

IN THE MATTER OF

an application that a caveat not lapse

BETWEEN

INTOP HOMES LIMITED

Applicant

AND

LOT 77 LIMITED

Respondent

Hearing:	On the papers
Appearances:	Joseph Shaw/Ewen McPherson for the Applicant J P Wood for the Respondent
Judgment:	1 November 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 1 November 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

NorrisWard McKinnon (J Shaw/E Macpherson), Hamilton, for the Applicant Court One (J P Wood/J Heatlie), Auckland, for the Respondent

INTOP HOMES LIMITED v LOT 77 LIMITED [2023] NZHC 3057 [1 November 2023]

Introduction

[1]                 The Court delivered a judgment in this matter on 31 August 2023 (the Judgment).1 The Judgment directed that the caveat lodged by Intop Homes Limited (Intop) against Lot 77 Limited’s (Lot 77) land should lapse.

[2]                 At [81] of the Judgment, counsel were directed to endeavour to agree costs and, failing agreement, to file memoranda as to costs. Counsel for the respondent filed a memorandum as to costs dated 12 September 2023, and counsel for the applicant filed a memorandum in response dated 19 September 2023.

[3]                 Lot 77 is seeking indemnity costs of $22,581.00, together with disbursements of $139.13. Intop’s position is that 2B costs only should be payable by Intop.

Lot 77’s submissions

[4]                 Mr Wood, for Lot 77, submits that Lot 77 should be indemnified by Intop as Intop improperly or unnecessarily made and maintained the application to sustain the caveat when:

(a)it had no caveatable interest in Lot 77’s property;

(b)it had other means to secure its objective of having security over the disputed amounts of its invoices.

[5]                 Mr Wood submits that the Court found Intop had no caveatable interest in  Lot 77’s property as it had chosen not to perfect its potential security interest in the construction contracts with Lot 77. He also submits that it would have failed to have a security interest in any case as the final invoices could not be issued until code compliance certificates had been issued, and even if its invoices could have been issued, Lot 77 disputed those invoices and the sums would not have been due and

1      Intop Homes Limited v Lot 77 Limited [2023] NZHC 2418.

payable until the parties had completed the dispute resolution processes in their contracts.

[6]                 At [6] of his submissions, Mr Wood sets out the history of the communications between the parties prior to the application to sustain the caveat being lodged by Intop.

[7]                 At [8] of his submissions, Mr Wood sets out correspondence which he submits made it clear to Intop that there was no caveatable interest.

[8]                 Mr Wood refers to the decision in Agape Holistic Retreat Corporation Ltd v Agape High Q Holistic Horsemanship Corporation Ltd.2 He cites the decision as authority for the proposition that Intop’s application was “improperly” brought and therefore falls under r 14.6(4)(a) of the High Court Rules 2016 as justifying an award of indemnity costs.

[9]                 Mr Wood further submits that Intop had an alternative to the caveat, namely the disputed monies that were held in a stakeholder account pending resolution.

Intop’s submissions

[10]             Mr Macpherson, for Intop, submits that 2B costs are appropriate and that the threshold for indemnity costs has not been met. He further submits that the proceedings were not improperly brought as there were real disputes as to whether the invoices were owing, and whether practical completion was reached, and the interpretation of the Residential Master Builders contract was a matter of public interest.

[11]             Mr Macpherson submits that under r 14.6(4)(a) to (c), indemnity costs are awarded where a party has behaved either badly or very unreasonably and refers to the decision in Bradbury v Westpac Banking Corporation.3 He submits it is not enough to characterise the application merely as “improper” as Lot 77 attempts to do, and submits that the use of the adverb “improperly” must be taken in context of the other

2      Agape Holistic Retreat Corporation Ltd v Agape High Q Holistic Horsemanship Corporation Ltd

(unreported) HC Auckland, CIV-2007-404-4210, 15 May 2008, Associate Judge Abbott.

3      Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400.

adverbs of “frivolous” or “vexatious” or “unnecessary”, referring to the decision in

Saunders v Winton Stock Feed Limited.4

[12]             As to Lot 77’s reliance on the Agape decision,5 Mr Macpherson submits it is not relevant as the manner in which the caveatable interest was said to arise in that case was different from the present case, and did not involve a memorandum of mortgage or an interest which is alleged to have arisen under a contract.

[13]Mr Macpherson makes the following further submissions:

(a)Intop had an arguable case that its caveatable interest had arisen under the Residential Master Builders contracts. Intop’s argument was that the caveatable interest arose on default of payment under cl 123 and Lot 77 argued that interest arose after the five working days in cl 125. He submits that these were both interpretation arguments and that the claim had a real issue to be tried and that it cannot be said that the application by Intop was improper.

(b)The second interpretation argument was the meaning of “final”, and that the argument on the facts that even if “final” was on issuing the CCC, that that point had been reached for all units either when the caveat was lodged (in the case of unit 15) or soon after , in which case by the hearing date the invoices were due and owing.

(c)As to the issue of the funds in trust, these funds were security for resolution of the wider dispute that was progressing through arbitration, and in exchange for Intop’s agreement to release the caveat over units 1 and 3. Consequently, he submits these funds in trust have no relevance to the question before the Court in the present case.

4      Saunders v Winton Stock Feed Limited [2009] NZCA 148.

5      Above, n 2.

Analysis

[14]             It is clear from the authorities that a high threshold must be passed before an order for indemnity costs is to be made. In Bradbury v Westpac Banking Corp the Court of Appeal summarised the distinction between the three broad approaches to costs as follows:6

(a)a standard scale applies by default where cause is not shown to depart from it;

(b)increased costs may be ordered where there is a failure by the paying party to act reasonably; and

(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[15]             In Bradbury, the Court of Appeal endorsed Goddard J’s remarks as to some of the categories in which indemnity costs have been ordered:7

(a)The making of allegations of fraud, knowing them to be false and the making of irrelevant allegations of fraud;

(b)particular misconduct that causes loss of time to the court and to other parties;

(c)commencing or continuing proceedings with some ulterior motive;

(d)doing so in wilful disregard of known facts or clearly established law; or

6      Bradbury v Westpac Banking Corp [2009] NZCA 234; [2009] 3 NZLR 400; (2009) 19 PRNZ 385 at [27].

7      Bradbury, above n 3, at [29].

(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions summarised in French J’s “hopeless case” test.

Result

[16]             In my view, 2B costs should be awarded to Lot 77 as the threshold for an award of indemnity costs has not been met. The reasons for this are:

(a)While the interpretations of the contract argued by Intop were not successful, they were not completely hopeless and to that extent the proceeding was not brought improperly.

(b)Intop’s conduct in relation to the proceeding cannot be characterised as behaving badly or very unreasonably within the test for indemnity costs.

(c)Intop’s counsel’s interpretation of the Residential Master Builders contract is of significance to the parties and to the public. This was a factor in Intop’s claim not falling within r 14.6(4)(a) to (c).

Orders

[17]             I order that Intop is to pay Lot 77 costs assessed on a 2B basis of $12,428.00, together with disbursements of $139.13, totalling $12,567.13.

…………………………….. Associate Judge Taylor