Johns v Wu
[2019] NZHC 392
•8 March 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001781
[2019] NZHC 392
BETWEEN LESLIE ROY JOHNS and LEONIE MARY JOHNS
PlaintiffsAND
YUNFENG WU and XIAOWEI CHENG
First Defendants
AUCKLAND COUNCIL
Second Defendant
Hearing: On the papers Appearances:
D M Law for Plaintiffs
E St John for First Defendants
S F Quinn and K Rogers for Second DefendantJudgment:
8 March 2019
JUDGMENT OF LANG J
[on costs]
This judgment was delivered by me on 8 March 2019 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
JOHNS and v WU and [2019] NZHC 392 [8 March 2019]
[1] On 17 January 2019, Nicholas Davidson J delivered a judgment in which he rejected each of the plaintiffs’ claims against the defendants.1 The parties have been unable to reach agreement regarding the issue of costs and the Court is therefore required to determine that issue.
[2] Nicholas Davidson J has now retired. As a result, it is necessary for another Judge to undertake the task of determining costs. The proceeding has been referred to me for that purpose.
The arguments
[3] All parties accept that the plaintiffs are liable to pay costs because they were the unsuccessful parties in this proceeding. The second defendant is content for costs to be awarded to it on a Category 2B basis together with disbursements as fixed by the Registrar. The plaintiffs take no issue with that.
[4] The first defendants also seek an order for costs on a Category 2B basis together with disbursements as fixed by the Registrar. The disbursements include the costs they incurred in engaging expert witnesses for the trial. In addition, the plaintiffs seek an uplift of 50 per cent to reflect the manner in which they say the plaintiffs approached their obligations as litigants in this proceeding.
[5] The first defendants have calculated that costs in the sum of $63,555 would be payable on a category 2B basis. They claim disbursements in the sum of $7,948.50.
[6] The plaintiffs accept that they should pay costs to the first defendants on a category 2B basis. They resist the first defendants’ application for increased costs.
Procedural background
[7] The proceeding was filed on 3 August 2017. It arose out of a dispute between the plaintiffs and the first defendants, who own neighbouring properties in Manurewa. The plaintiffs took issue with the first defendants building a secondary dwelling on their property. They considered this breached a restrictive covenant registered against
1 Johns v Wu [2019] NZHC 12.
the title to the first defendants’ land. In this proceeding they sought mandatory injunctive relief requiring the first defendants to cease the construction of the secondary dwelling and to remove it from their property.
[8] The application for interim relief came before Muir J on 17 November 2017. By that stage the first defendants had also filed an application for summary judgment. The plaintiffs withdrew their application for interim relief but the first defendants proceeded with their application for summary judgment. Muir J delivered an oral judgment on 17 November 2017 dismissing that application on the basis that the plaintiffs had an arguable case against the first defendants.
[9] The proceeding then proceeded through the interlocutory phases and the trial took place over three days in September and November 2018.
Relevant principles
[10] Costs are at the discretion of the Court.2 However, r 14.2(1)(a) of the High Court Rules 2016 (the rules) provides that the party who fails with respect to a proceeding should pay costs to the party who succeeds.
[11] Rule 14.6 provides for the payment of increased and indemnity costs. It relevantly provides as follows:
14.6 Increased costs and indemnity costs
(1)Despite rules 14.2 to 14.5, the court may make an order—
(a)increasing costs otherwise payable under those rules (increased costs); or
(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
(2)The court may make the order at any stage of a proceeding and in relation to any step in it.
(3)The court may order a party to pay increased costs if—
2 High Court Rules 2016, r 14.1.
(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i) failing to comply with these rules or with a direction of the court; or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or
(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
…
[12] The first defendants contend an award of increased costs is justified for several reasons. First, they allege the plaintiffs have contributed unnecessarily to the time and expense of the proceeding by failing to comply with their obligations under both the rules and directions made by the Court. They also say the plaintiffs took or pursued unnecessary steps or arguments that lacked merit. They also contend the plaintiffs failed without reasonable justification to admit facts, evidence, documents and/or to accept orthodox legal propositions. Furthermore, they say the plaintiffs failed without reasonable failed without reasonable justification to accept several offers of settlement. Finally, they say that other factors outside the conduct of the litigation also justify an increased award of costs.
Failing to comply with the requirements of the High Court Rules 2016 or directions made by the Court
[13] The first defendants rely on several factors under this head. First, they say the plaintiffs ignored timetable directions that Woolford J made by consent on 5 October 2017. These related to the steps to be taken in relation to the application for an interim injunction. This led to two urgent telephone conferences and required the first defendants to file supplementary submissions. Furthermore, the plaintiffs filed their affidavits late and failed to serve a copy on the first defendants until just prior to the hearing on 17 November 2017.
[14] The first defendants then point to the fact that the plaintiffs failed to comply with a consent order that Associate Judge Sargisson made on 7 February 2018. This required the plaintiffs to complete discovery by 1 March 2018. The first defendants did not provide discovery until 3 August 2018, just five weeks before trial. They did not take that step until the first defendants had applied to have the proceeding struck out for non-compliance with the Court’s directions.
[15] Next, the first defendants point out that the plaintiffs initially ignored a notice issued on 17 November 2017 requiring them to provide further particulars of their claim. They did not comply with that notice until 1 February 2018. They then completely ignored a second notice requiring further particulars of their claim.
[16] The first defendants also say the plaintiffs failed to comply with directions made in relation to the service of briefs of evidence. When the first defendants asked the Court to intervene regarding that issue, the plaintiffs said they would rely at trial solely on the affidavits filed in relation to the application for an interim injunction. This led Jagose J to direct on 6 August 2018 that the plaintiffs were not to file or serve any further evidence.
[17] Next, the first defendants say the plaintiffs ignored the original timetable for the filing and service of opening submissions, the common bundle and the chronology. They then failed to file and serve these documents within the further period granted to them by the Court as an indulgence. When they eventually served the common bundle, it did not contain several documents the first defendants had advised they wanted in
the bundle. This required the first defendants to file their own bundle. Following the trial, the plaintiffs also filed their closing submissions outside the timetable agreed to by the defendants and the Court.
[18] Counsel for the plaintiffs does not address any of these issues in submissions filed in relation to the issue of costs. The plaintiffs must therefore be taken to accept the assertions made by Mr St John regarding the shortcomings in the plaintiffs’ performance.
Taking or pursuing an unnecessary step or an argument that lacked merit
[19] The first defendants contend the plaintiffs’ entire case lacked merit and that the plaintiffs failed throughout to articulate the essential basis for their case.
[20] It is obviously difficult to assess this issue without having presided at the trial. It seems to me, however, that two factors count against the first defendants’ submission under this head. The first is that Muir J dismissed the first defendants’ application for summary judgment because he considered the plaintiffs had an arguable case. The second is that, read as a whole, the substantive judgment does not support the first defendants’ argument either. It seems to me that most of the principal issues dealt with at trial were contestable. I do not accept the submission for the first defendants that the lack of merit in the plaintiffs’ case is a factor that justifies an uplift of costs.
Failing without reasonable justification to admit facts, evidence, documents, or accept a legal argument
[21]Under this head Mr St John submits on behalf of the first defendants:
(a)The plaintiffs had no justification for calling evidence from Mr Arumugam regarding the cost of building the secondary dwelling when they had not challenged the legitimacy of those costs;
(b)There was no justification for the plaintiffs adducing evidence from Mr White to the effect that building costs should be calculated on the basis of a 114 square metre home multiplied by an internal modal cost; and
(c)The plaintiffs failed to accept orthodox legal propositions. By way of example, their counsel asserted, without providing any authority, that consent post construction was irrelevant, and that the secondary dwelling had to be removed regardless of any equitable considerations.
[22] I find it difficult to assess the weight to be given to these submissions because I was not the trial Judge and therefore do not have a sense of the significance these issues assumed during the course of the trial. The Judge’s decision does not, however, refer to the evidence given by these witnesses in critical terms. I therefore regard these issues as a neutral factor for present purposes.
Failing without reasonable justification to accept an offer of settlement
[23] Under this head Ms St John points out that the first defendants made three separate offers to the plaintiffs inviting them to discontinue the proceeding on the basis that costs would lie where they fell. These were made on 10 August, 19 September and 2 October 2017 respectively. All three were met with no response.
[24] The plaintiffs do not respond to this issue. They must therefore be taken to accept that they failed to respond to three offers that would have left them in a materially better position than that in which they now find themselves. It needs to be borne in mind, however, that the plaintiffs received the offers at a very early stage of the proceeding. They subsequently succeeded in defending the application for summary judgment. Thereafter the first defendants made no further settlement offers.
[25] The plaintiffs obviously took a significant risk in proceeding with their claim, and that risk became a reality once judgment was delivered. The overall tenor of the Judge’s decision is not, however, to the effect that the plaintiffs’ case was hopeless or doomed from the outset to fail. The fact that the plaintiffs failed to respond in any way to the settlement offers is regrettable, and reflects the approach they took to many matters in the conduct of this litigation. I do not consider, however, that their failure to respond to invitations to discontinue the proceeding at such an early stage warrants an award of increased costs.
Other reasons
[26] Mr St John relies under this ground on aspects of the conduct of the plaintiffs in relation to matters that are connected with, but not within the conduct of, the litigation. They relate to actions allegedly taken by the plaintiffs and others in the neighbourhood of the first defendants’ property.
[27] The first of these relates to a sign that was erected by an entity calling itself “The Garden Society” on a public reserve adjoining the first defendants’ property. The sign was erected after the proceeding commenced, and asserted that the secondary dwelling on the first defendants’ property “probably” breached the restrictive covenant with which this proceeding is concerned. The sign also said the High Court had agreed to hear a case for the removal of the building. It then said:
The Court action is for the benefit of all property owners; to protect us from nasty rental building projects which devalue all our properties.
[28] Then, on 12 August 2017, the first defendants contend the plaintiffs distributed a leaflet that Mr St John describes as follows:
[The leaflet] asserted that the restrictive covenant required a build cost of “about $350,000” but the Wu’s dwelling would probably cost “about
$130,000”. The leaflet described the Wu’s dwelling as “sub-standard” which would “diminish the value of properties”. It said Council had put a “stop” to the building; but [Mr Wu] later started “furiously building again.”
[29] Mr St John submits that these comments were manifestly untrue, and that the sign and the leaflet were both humiliating and distressing for the first defendants. He says an uplift is required to reflect the plaintiffs’ actions in relation to them. He also points out that the plaintiffs confirmed in evidence that their costs and expenses are being shared between members of the entity known as “The Garden Society”. Mr Johns said in evidence that he believed this entity was an incorporated society.
[30] The plaintiffs resist any award being made under this head. They contend Muir J said that the erection of the sign did not amount to an ulterior motive for issuing the proceeding. They say he also said the sign was part of “the cut and thrust” of litigation, and that he urged the parties to adopt a measured approach. If this is correct, however, the Judge’s observations must have been made orally during the hearing
because they did not find their way into the judgment he delivered on 17 November 2017.
[31] I do not consider it appropriate to add un uplift to reflect these factors. They may have been distressing for the first defendants, but they did not have to deal with them on a daily basis because they were residing at West Harbour at the time. The Manurewa property was an investment property. Furthermore, although the sign and leaflet were mentioned briefly in the judgment, the Judge made no express finding that the plaintiffs were responsible for them. I also consider such conduct, even if it could be sheeted home to the plaintiffs, falls outside the type of conduct for which the courts have traditionally awarded increased costs. In particular, the sign and the leaflet had no impact on the manner in which the litigation was conducted or the costs the first defendants incurred in defending it. Finally, the fact that other persons may be assisting the plaintiffs to fund the proceeding is not a reason to increase costs under r 14(3)(d). I therefore do not accept that grounds exist for an award of increased costs under this head.
Decision
[32] It follows that I consider the first defendants have established one ground for an award of increased costs. This relates to the plaintiffs’ failure to comply with timetable directions and notices issued by the first defendants. I now need to consider whether to exercise my discretion in favour of an award of increased costs.
[33] The defendants contend that no uplift should be applied because the proceeding has resulted in findings that are of wider significance than the present litigation. They say it has clarified the scope of enforceability of the restrictive covenant, and the Judge’s decision will be of significance to several properties that are subject to the same covenant.
[34] That may be so, but it does not excuse the manner in which the plaintiffs approached their obligations as litigants. Furthermore, I am not in a position to give this submission a great deal of weight because I have no information to suggest that other land owners may have been concerned about the interpretation and enforceability of the covenant.
[35] I have concluded that an increase is warranted to recognise the approach taken by the plaintiffs towards important interlocutory issues. Their casual approach to compliance with directions and orders made by the Court is well below the standard of performance expected of parties to litigation in this Court. In particular, the delay in providing discovery was significant, as was the manner in which the plaintiffs failed to meet their obligations in relation to the filing of the opening submissions, the common bundle and the chronology. The delay in complying with the first notice requiring further particulars was also significant, and they failed to respond at all to the second. The fact that a conference had to be called to address the issue of the evidence the plaintiffs wished to adduce at trial also reflects an unjustifiably relaxed approach to the conduct of the proceeding.
[36] I consider these issues should result in an uplift of 100 per cent on all steps taken in the proceeding between the Minute issued by Associate Judge Sargisson on 7 February 2018 and the preparation of briefs of evidence. Excluded from the steps to which the uplift shall apply are the costs claimed for preparation of the first defendants’ affidavit of documents and inspection of the second defendants’ documents.
Orders
[37] The plaintiffs are to pay the costs of both defendants on a category 2B basis together with reasonable disbursements as fixed by the Registrar. These are to include the fees charged by expert witnesses. With the two exceptions referred to above, costs are increased in the case of the first defendants by 100 per cent in relation to all steps taken by the first defendants between 7 February 2008 and the preparation of the first defendants’ briefs of evidence.
Lang J
Solicitors:
Law & Associates, Manukau
Yu Lawyers, Balmoral, Auckland DLA Piper, Auckland
E ST John, Auckland
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