Kai Iwi Tavern Limited v New Zealand Guardian Trust Company Limited
[2013] NZHC 2464
•20 September 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-6957 [2013] NZHC 2464
BETWEEN KAI IWI TAVERN LIMITED
Plaintiff
AND
THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED
First Defendant
AND
ON THE WING TRUSTEES LIMITED
Second Defendant
AND
NIGHTINGALE FINANCE LIMITED
First Third Party
AND
TORY PROPERTY FINANCE LIMITED
Second Third Party
AND
CBRE RICHARD ELLIS (AGENCY) LIMITED
Third Third Party
AND
FISHER TRUSTEE LIMITED
Fourth Third Party
| Hearing: | (On the papers) |
Counsel: | D S M Gloyn for Plaintiff M J Tingey for the First Defendant |
Judgment: | 20 September 2013 |
COSTS JUDGMENT OF PETERS J
Solicitors: Bytalus Legal, Auckland
Bell Gully, Auckland
Carter Kirkland Morrison, Auckland Minter Ellison Rudd Watts, Auckland
KAI IWI TAVERN LTD v THE NEW ZEALAND GUARDIAN TRUST COMPANY LTD [2013] NZHC 2464
[20 September 2013]
[1] The First Defendant (“NZGT”), Third Third Party (“CBRE”) and the First, Second and Fourth Third Parties (together “Fisher”) seek an order that the Plaintiff (“Kai Iwi”) pay their costs in this proceeding on a 2B basis, together with disbursements. I refer to NZGT, CBRE and Fisher together as the “successful parties”.
[2] Kai Iwi submits that no orders as to costs should be made, alternatively takes issue with the quantum claimed.
Background
[3] Kai Iwi’s proceedings arose as follows.
[4] Pursuant to provisions of the Property Law Act 2007 (“Act”), in July 2008 NZGT as mortgagee adopted an agreement for sale and purchase (“ASP”) entered into by its mortgagor/vendor in May 2008.
[5] The sale settled in August 2008 following which NZGT disbursed the proceeds of sale. Amongst other things, NZGT paid approximately $340,000 to CBRE as real estate commission, approximately $50,000 to NZGT’s solicitors in legal costs, and the balance to NZGT and Fisher as first and second mortgagee respectively. Kai Iwi itself was a mortgagee but behind Fisher in order of priority. The proceeds of sale were insufficient to allow for any payment to Kai Iwi.
[6] Kai Iwi brought proceedings against NZGT, initially pleading five causes of action alleging amongst other things that NZGT had overpaid itself and Fisher, and that NZGT had breached s 185 of the Act in paying CBRE and the solicitors’ costs ahead of Kai Iwi. NZGT defended the proceedings and joined CBRE and Fisher. CBRE and Fisher defended the claims against them and Fisher cross-claimed against CBRE.
[7] On 6 June 2012 the parties, excluding CBRE, entered into a Deed of Settlement (“Deed of Settlement”). Kai Iwi relies on the Deed of Settlement in opposing the claims for costs. At this point, however, it is enough to say that it was a
term of the settlement that Kai Iwi would discontinue all but its fifth cause of action, and that it would restrict that cause of action to its claim that NZGT had breached the Act by its payment to CBRE, so that the claim in respect of the payment to the solicitors was abandoned.
[8] I dismissed the claim by Kai Iwi and found that NZGT’s payment to CBRE was in accordance with the provisions of the Act. Given that, it was not necessary to consider NZGT’s claims against CBRE and Fisher.
[9] NZGT seeks costs against Kai Iwi on the basis that it succeeded and as a general rule costs follow the event.
[10] CBRE and Fisher seek costs directly from Kai Iwi, relying on Shirley v Wairarapa District Health Board1 as authority for such an award.
Kai Iwi’s response
[11] Kai Iwi’s response to the claims for costs is contained in a memorandum dated 25 June 2013, on its face filed by the solicitors on the record for Kai Iwi, but signed by Mr B D Clode. Mr Clode’s association with Kai Iwi is unclear.
[12] Several submissions are made in that memorandum.
[13] The first is that the effect of cl 5.4 of the Deed of Settlement was to settle all matters as to costs between the parties.
[14] The second is that, if wrong in that submission, the total costs and disbursements claimed are excessive, being some $88,000. Alternatively, Kai Iwi submits that the successful parties have erred in their calculation of costs.
[15] Kai Iwi also sought an opportunity to comment on the individual costs memoranda. I gave Kai Iwi’s solicitor on the record an opportunity to file a further submission but no memorandum was filed.
1 Shirley v Wairarapa District Health Board [2006] NZSC 63; [2006] 3 NZLR 523.
Discussion
[16] The first matter to consider is cl 5.4 of the Deed of Settlement and whether it precludes the present applications for costs by the successful parties. If Kai Iwi fails on this, it becomes necessary to consider other issues as to liability, particularly as between Kai Iwi and CBRE and Fisher, and then quantum.
Deed of Settlement
[17] Kai Iwi submits that by cl 5.4 each party agreed to bear their own costs in the proceeding and, accordingly, no award of costs should now be made in favour of any of the successful parties.
[18] Clause 5.4 cannot affect CBRE as it was not a party to the Deed of Settlement. NZGT and Fisher, who were parties, reject Kai Iwi’s submission.
[19] Clause 5.4 provides:
Each Party shall bear its own costs in relation to the preparation and execution of this Agreement and in relation to the Disputed Matters.
[20] The term “Disputed Matters” is not defined in the Deed of Settlement.
[21] Kai Iwi submits that Disputed Matters means all of the claims brought by the parties, with the exception of Kai Iwi’s claim against CBRE. That cannot be correct. Kai Iwi did not proceed against CBRE and, in any event, the submission flies in the face of the clear terms of the Deed of Settlement.
[22] NZGT and Fisher submit that the Deed of Settlement does not affect issues as to costs in the proceedings. I accept that submission for the following reasons.
[23] As at the date of the Deed of Settlement, Kai Iwi’s statement of claim pleaded the five causes of action to which I have referred.
[24] Pursuant to the Deed of Settlement, Kai Iwi was to discontinue the first four causes of action, and to continue the fifth cause of action but amend the same so as to confine it to NZGT’s payment to CBRE. Consequential upon that, NZGT was to
continue particular claims against CBRE and Fisher. The Deed of Settlement also provided that the parties would file a consent memorandum and that Kai Iwi would file a third amended statement of claim, both documents to be in a form contained as schedules to the Deed of Settlement.
[25] By the consent memorandum, the parties, again excluding CBRE, informed the Court that they had settled all matters between them except for: Kai Iwi’s fifth cause of action (to be amended as I have said); the second cause of action NZGT had pleaded against CBRE in its amended statement of claim; NZGT’s third cause of action against Fisher; and cross claim(s) by Fisher against CBRE. The parties advised the Court that they would file notices of discontinuance with no question as to costs for all claims except those to which I have just referred.
[26] Given that, I do not construe cl 5.4 of the Deed of Settlement as precluding the present applications for costs. In my view, it is clear the parties agreed not to raise issues as to costs on the claims that were to be discontinued, but that the parties did not bind themselves any further.
Kai Iwi’s liability for costs and disbursements
[27] NZGT as the successful defendant is entitled to an award of costs and disbursements against Kai Iwi.2 Costs are sought and granted on a 2B basis.
[28] As for CBRE and Fisher, the Court has discretion to order an unsuccessful plaintiff to pay the costs of a third party. The relevant commentary in McGechan is as follows: 3
Normally a defendant who has successfully defended the plaintiff’s claim will be ordered to pay the costs of a third party joined by that defendant. However, if the plaintiff’s claim is effectively against a third party, or if that claim had the inevitable result of the third party being joined, then the unsuccessful plaintiff may be ordered to pay the third party’s costs direct. Alternatively, the defendant may be permitted to add the costs which it has been ordered to pay to the third party, to the costs which the plaintiff should pay the defendant. Thus, a successful defendant should only be called on to meet a third party’s costs if the joinder was unnecessary or was for some other reason unjustified.
2 High Court Rules, r 14.2(a).
3 McGechan on Procedure (online looseleaf ed, Brookers) at [HRPt14.08].
[29] From that passage it appears that an unsuccessful plaintiff may be ordered to pay costs to a third party directly if the plaintiff’s claim was effectively against the third party or if the plaintiff’s claim had the inevitable result of the third party being joined.
[30] Both CBRE and Fisher referred me to Shirley v Wairarapa District Health Board.4 In that case plaintiffs commenced proceedings against the defendant DHB. With the consent of the plaintiffs, the DHB joined Mr Shirley as (another) defendant. The DHB then settled with the plaintiffs, who continued their litigation against Mr Shirley. Mr Shirley succeeded but was unable to recover costs from the (legally aided) plaintiffs and he sought costs against the DHB.
[31] The High Court awarded costs against the DHB. That order was reversed by the Court of Appeal. On appeal, the Supreme Court confirmed that the DHB, as a successful defendant, should not have been ordered to pay or contribute to Mr Shirley’s costs. The Court said that:5
[22] ... We think it more likely that when, as here, a defendant has properly joined a third party and the plaintiff fails, the plaintiff would be ordered to pay the costs of both the defendant and the third party.
[32] As I read Shirley, the case is directed to the issue that arose in that particular case, namely whether a defendant who has succeeded might still be required to pay or contribute to the costs of another party. As for when a plaintiff might have to pay the costs of a third party, the commentary from McGechan which I have quoted refers to Money World NZ 2000 Ltd v KVB Kunlun NZ Ltd.6 The Supreme Court in Shirley also cited this decision.
[33] In Money World, after reviewing English authority, Laurenson J held that an unsuccessful plaintiff may be ordered to pay a third party’s costs directly (rather than by an increased award in favour of the successful defendant) if the claim against the third party was the “inevitable” result of the plaintiff’s proceedings.7
4 Shirley v Wairarapa District Health Board, above n 1.
5 Ibid, at [22].
6 Money World NZ 2000 Ltd v KVB Kunlun NZ Ltd HC Auckland CIV-2003-404-2542, 23 September 2005.
7 Ibid, [26] – [33].
[34] In Tindall & Ors v Far North District Council8 Winkelmann J likewise stated that an order for costs in favour of the third party may be made in the following circumstances:9
As a third party will be in the position of a defendant in respect of the party joining it, costs issues should arise in the first instance between those parties. However, the Court does have a discretion to award costs as between a plaintiff and a third party. The key principles are set out in Money World NZ 2000 Ltd v KVB Kunlun NZ Ltd HC AK CIV2003-404-2542 23 September 2005. Laurenson J considered that in the normal course a successful defendant will have to expect an order for costs in favour of a third party joined by that defendant. If however, the thrust of the plaintiff’s claim is in substance against the third party, or if the plaintiff’s claim has the inevitable result of further parties being joined, then the unsuccessful plaintiff may be ordered to pay the third party’s costs direct.
[35] Applying those principles to the present case, NZGT joined CBRE on the ground that, if Kai Iwi succeeded, NZGT had paid CBRE under mistake of law as to its obligations under the ASP and/or under the Act. In the circumstances, NZGT alleged that CBRE was required to repay the amount so paid. I consider that Kai Iwi’s claim against NZGT had the inevitable result of NZGT joining CBRE. Given that, it is open to me to make an award of costs and disbursements against Kai Iwi in CBRE’s favour and I do so, with costs to be on a 2B basis.
[36] I am not satisfied, however, that Kai Iwi’s claim against NZGT was, in effect, against Fisher or that it had the inevitable consequence that NZGT would join Fisher and that Fisher would defend those proceedings.
[37] NZGT’s claim against Fisher was brought on cl 3 of a Deed of Agreement (“Deed”) between those parties dated 2 October 2008. Recital D to the Deed records that, in or around 1 July 2008, NZGT and Fisher agreed that they would jointly adopt the ASP and that they would share responsibility and liability for the adoption in proportion to the principal sums that each had advanced to the mortgagor. Recital D also records that NZGT had adopted the ASP for itself and on behalf of Fisher. By cl 3, Fisher agreed to indemnify NZGT for Fisher’s proportionate share of any losses NZGT might incur or suffer as a result of the adoption.
8 Tindall & Ors v Far North District Council HC Auckland CIV-2003-488-135, 25 May 2007.
9 Ibid, at [32].
[38] I am not satisfied that NZGT’s claim against Fisher under the Deed was the inevitable result of Kai Iwi’s claim against NZGT. The Deed was the outcome of an arrangement between NZGT and Fisher alone. Given that, I am not satisfied that the circumstances in which the Court may order a plaintiff to pay a third party’s costs are made out as regards Fisher and I decline to make any award of costs against Kai Iwi in Fisher’s favour.
Quantum
[39] It follows from the above that NZGT’s claim for costs and disbursements should be confined to those steps and items incurred in defending Kai Iwi’s fifth cause of action and in pursuing its cause of action against CBRE. CBRE’s should be confined to defending NZGT’s claim.
[40] NZGT, CBRE and Kai Iwi are to liaise with the Registrar to the extent necessary to finalise costs and disbursements.
Result
[41] Subject to what is said in [39], I make orders that Kai Iwi should pay NZGT’s and CBRE’s costs on a 2B basis, with disbursements as fixed by the Registrar.
[42] I decline Fisher’s application for costs and disbursements against Kai Iwi.
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M Peters J
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