Kevler Homes Christchurch Limited v Carston Developments Limited
[2022] NZHC 2396
•19 September 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2022-409-000096
[2022] NZHC 2396
UNDER Section 143 Land Transfer Act 2017 IN THE MATTER
of Caveat Number 12349499.1
BETWEEN
KEVLER HOMES CHRISTCHURCH LIMITED
Applicant
AND
CARSTON DEVELOPMENTS LIMITED
Respondent
Hearing: On the papers Counsel:
A J Summerlee and F A Trowbridge for Applicant T J Mackenzie for Respondent
Judgment:
19 September 2022
COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 19 September 2022 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
KEVLER HOMES CHRISTCHURCH LTD v CARSTON DEVELOPMENTS LTD [2022] NZHC 2396
[19 September 2022]
[1] Carston Developments Ltd (Carston) is a land developer undertaking a subdivision at Halswell. The subdivision is in five stages. Kevler Homes Christchurch Ltd (Kevler) entered into agreements with Carston to purchase sections in the subdivision, including sections in both stages 2 and 3. Carston purported to cancel the stage 2 and 3 agreements on the basis that titles had not issued prior to sunset dates. Kevler did not accept the cancellation and lodged a caveat against the head title covering stages 2 and 3.
[2] On 25 February 2022, Carston applied to the Registrar-General of Lands to lapse the caveat. Kevler, in turn, applied to the High Court to sustain the caveat. Just shortly before the hearing of Kevler’s application, Carston conceded that the caveat should be sustained. The parties could not agree on costs. By consent, the Court made an order that the caveat be sustained and timetabled the filing of memoranda on costs.
[3] The costs memoranda have now been filed. Kevler seeks costs on the basis it was the successful party. Carston argues costs should either be reserved, or the quantum claimed by Kevler is overstated.
[4] It emerges from the memoranda that the number of issues between the parties are fewer than perhaps had originally been understood. There are really just two issues arising, namely:
(a)Should costs be reserved because Kevler delayed in issuing substantive proceedings to establish its claimed interest?
(b)Are Kevler’s claims overstated in respect of:
(i)the filing of memoranda;
(ii)expert’s fees; and
(iii)its claim for the preparation of submissions on costs?
Issue 1 - Should costs be reserved?
[5] The starting point is that all matters of costs are discretionary, but the discretion must be exercised on a principled basis.1 The determination of costs, so far as possible, should be both predictable and expeditious,2 and the party that has lost should pay the costs of the party that has won unless there are exceptional reasons to the contrary.3
[6] Hinde, McMorland and Sim Land Law in New Zealand notes the Court’s usual approach as:4
A caveat application is a proceeding in itself, so “failure” and “success” for the purposes of costs will be determined by reference to the outcome of the application. Where a caveator has succeeded in sustaining a caveat, it is therefore the usual practice of the Court to award costs to the caveator on the application, even where the caveator has shown merely an arguable case for the claimed caveatable interest, and his or her claim remains to be determined in a separate and substantive proceeding.
[7] There is no doubt that Kevler was the successful party. It obtained the relief it sought in the proceeding. It follows that Kevler is prima facie entitled to its costs.
[8] Rule 14.7 of the High Court Rules provides that the Court may refuse to make an order for costs or may reduce costs otherwise payable to a party in specified circumstances. Carston does not refer to r 14.7 in its submissions. It appears to me that the only category of case in r 14.7 that might be engaged here is r 14.7(g), which provides:
14.7 Refusal of, or reduction in, costs
Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if—
…
(g) some other reason exists which justifies the court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.
1 High Court Rules 2016, r 14.1(1).
2 Rule 14.2(1)(g).
3 Rule 14.2(1)(a) and Shirley v Wairarapa District Health Board [2006] NZSC 63; [2006] 3 NZLR 523 at [19].
4 D W McMorland and others Hinde, McMorland and Sim’s Land Law in New Zealand (online ed, LexisNexis) at [10.020A].
[9] The authors of McGechan on Procedure note that r 14.7(g) is something of a catch-all provision which requires good reason for departure from the general rule that costs follow the event. They note also the concern that the categories of case where r 14.7(g) applies is to be kept limited to avoid the exception swallowing the rule.5
[10] Carston argues that following its purported cancellation of the agreements, it was incumbent upon Kevler to promptly commence substantive proceedings to establish its claimed interest. It says it took Kevler nearly seven months to commence its proceeding, and once it had done so Carston accepted that the caveat be sustained.
[11] Carston relies upon a comment of the Supreme Court in Cowan v Cowan that where the existence of a caveat has the potential to cause substantial loss to the registered owner “it is incumbent on the caveator to issue promptly and prosecute diligently, substantive proceedings to establish the claimed interest”.6
[12] It also relies upon Joshi v Eesha Holdings Ltd where the High Court dismissed an application to remove a caveat subject to a condition the caveat would remain only if the caveator commenced and promptly prosecuted a proceeding to establish its interest.7 In Joshi, the Court reserved costs, in part due to the failure by the caveator to have advanced a substantive claim in a timely manner.
[13] Carston says that the same principles should apply here. It argues that it was unable to progress its subdivision for seven months whilst Kevler did nothing to advance its substantive claim. I do not accept Carston’s submissions.
[14] While I do not take issue with the principle in Cowan, it was not concerned with the issue of costs.
[15] As to Joshi v Eesha Holdings, the costs decision in that case was extremely brief, consisting of just two paragraphs, and referring to no authorities. It is contrary to the weight of authorities. The Judge’s criticism of the caveator for having done
5 A C Beck and others McGechan on Procedure (looseleaf ed, Thomson Reuters) at [HR14.7.01(e)(i)]
6 Cowan v Cowan [2022] NZSC 43 at [64].
7 Joshi v Eesha Holdings Ltd [2015] NZHC 3062.
nothing to advance matters is incongruent with her conclusion in her substantive judgment that whether the caveator had acted reasonably in taking no steps to issue proceedings was a matter that could only be determined at trial.8
[16] Furthermore, Joshi is distinguishable on its facts. There, the Judge noted that the landowners had been left in the position of being unable to deal with their property because of the caveat. Here, Kevler’s solicitors advised Carston’s solicitors on 9 February 2022 that it would not prevent dealings that did not affect its claimed interest, and I understand Carston obtained a s 224(c) certificate on 5 July 2022, indicating the subdivision was indeed advanced.
[17] There is a further matter which Carston’s submission overlooks. Insofar as stage 3 agreements are concerned, it was or should have been known to Carston, even before Kevler filed its application, that its purported cancellation of them was invalid. On 1 March 2022, the Registrar-General of Land gave notice to Kevler that Carston had applied to lapse the caveat. On 9 March 2022, Kevler’s solicitors advised Carston’s solicitors that in respect of the stage 3 agreements, the notice of cancellation pre-dated the expiry of sunset dates. As a result, in his affidavit in opposition to the application, Carston’s director, Andrew Chapman, noted it was only the cancellation in respect of the stage 2 lots that was an issue. However, in those circumstances it was inevitable that Kevler’s caveat would be sustained regardless of what view the Court took with respect to the stage 2 agreements. Despite that, Carston maintained its opposition to the application until just prior to the defended hearing. It is difficult, in those circumstances, to see how it can complain about the delay.
[18] Carston cannot legitimately assert that it was necessary to maintain its opposition to the application because Kevler had not filed a substantive claim. It is, in my view, relevant that this was not a ground of opposition to the application that Carston relied upon.
[19] Further, any concern Carston may have had would have been appropriately dealt with by it agreeing to the making of an order sustaining the caveat on the
8 Joshi v Eesha Holdings Ltd [2015] NZHC 2837 at [25].
condition that Kevler commenced its substantive proceeding. In this regard, Hinde, McMorland and Sim notes:
… Where it appears to the registered owner that the caveator will likely be able to show an arguable case, it is advisable for the registered owner to invite the caveator to commence a substantive proceeding within a stated time, failing which the registered owner will challenge the caveat with the intent that any order sustaining the caveat be on the condition that the caveator commence a substantive proceeding. In this way, even if the caveat is sustained, the registered owner should be considered the successful party, and thereby entitled to costs, if such a condition is obtained.
(footnotes omitted)
[20] For those reasons, I find that Carston has not shown any good reason why the rule that costs follow the event should be departed from.
Issue 2 - Are Kevler’s claims overstated?
[21] Kevler has submitted a schedule of the costs and disbursements claimed. It has sought costs on all steps in the proceeding on a category 2B basis.
Filing memoranda
[22] Kevler seeks costs for filing memoranda of 23 March 2022, 27 April 2022, and 5 July 2022. Carston submits that a blanket assessment for banding purposes is incorrect and that, in respect to the filing of memoranda, making awards on a 2B basis is inappropriate.
[23] In respect of the memorandum of 23 March 2022, Carston notes this was a one- page joint memorandum seeking interim orders. The memorandum of 27 April 2022 was again a one-page joint memorandum regarding timetabling. The memorandum of 5 July 2022 was a short memorandum seeking orders by consent.
[24] Kevler argues that applying a blanket assessment provides a predictable system for assessing costs. It contends that Carston’s granular approach has been rejected in several cases and refers to the observation in Body Corporate 172108 v Manchester
Securities Ltd that it is an error to assess the amount of professional time spent by reference to the length of a document and that:9
… Any decisions by solicitors and counsel to file a memorandum usually have had a gestation period of consideration of the need for a memorandum. A strong case would need to be made out that the decision and preparation was so simple it was a 2A rate. I leave all memoranda at 2B.
[25] The blanket approach that Kevler has adopted is not correct. The High Court Rules require the appropriate time allocation for each step in the proceeding to be separately considered after the step has been taken.10
[26] Having assessed each of the memoranda, I consider that a comparatively small amount of time would have been involved in their preparation. I make that assessment based not only on the length of the documents, but on the absence of any real legal issues and the straightforward subject matter.
[27] Kevler will be awarded costs in respect of the preparation of the memoranda on a 2A basis.
Expert’s fees
[28] Kevler has claimed as a disbursement an amount of $4,674.75 invoiced to it by Misura Ltd for providing expert evidence in support of its application. It says expert witnesses’ fees are recoverable if they are specific to the conduct of the proceeding and, here, it was reasonably necessary to engage an expert, and the fee is reasonable in amount. It says the main issue was whether Kevler had a reasonably arguable case that Carston had not taken reasonable steps to obtain titles before the relevant sunset dates, and the expert’s evidence was required to rebut Carston’s evidence as to matters that impacted upon the construction period.
[29] Carston argues that the evidence was not reasonably necessary as it was unlikely to be substantially helpful to the Court in determining the application. It
9 Body Corporate 172108 v Manchester Securities Ltd [2017] NZHC 1252 at [58].
10 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [161]; and David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis Wellington, 2022) at 28.
argues the evidence will “have a better home” in the substantive proceedings and experts’ fees can be determined at that time depending on the outcome.
[30] Expert witnesses’ fees and expenses as disbursements will be recoverable under r 14.12(2) and 14.12(3) of the High Court Rules when they are:
(a)specific to the conduct of the proceeding;
(b)reasonably necessary for the conduct of the proceeding; and
(c)reasonable in amount; but
(d)may be disallowed or reduced if the claim is disproportionate in the circumstances of the proceeding.
[31] The onus is on the claiming party to establish the reasonableness on the balance of probabilities. This is an intensely factual inquiry. There is broad judicial discretion in making the assessment.
[32] I do not propose to order Carston to pay Kevler the expert’s fees in this proceeding for several reasons.
[33] First, as I noted above, it appears to me that the result of the proceeding was inevitable given that Kevler undoubtedly had a caveatable interest in the land under the stage 3 agreements. On that basis it is hard to justify the expense of expert witness evidence as reasonably necessary.
[34] Second, having considered the expert’s evidence, it does not appear to me that it provided substantial assistance in determining the issue to which it was directed beyond what was already before the Court.
[35] Third, all that I have before me is an invoice from Misura Ltd with a narration of work done but without any further information from which I can make a proper assessment as to the reasonableness of the fee.
[36] Finally, I consider there is much force in Carston’s submission that the expert’s evidence is more directly relevant to the substantive proceeding and can appropriately be recovered in that proceeding should Kevler prevail. In effect, I am deferring Kevler’s claim to recover this disbursement to be determined in the proceeding to which it appropriately relates.
Submissions on costs
[37] Kevler referred to authorities where the Court has made awards for preparing costs submissions.
[38] Carston argues that “cost on costs” are not usually awarded. While accepting the Court has a discretion to award such costs, it says this is not such a case because it has acted reasonably and raised points with merit.
[39] The authors of McGechan on Procedure note that the High Court has failed to deal consistently with applications for the costs of applications for costs but that the “preferable view” is that such costs are to be treated no differently for cost purposes from an ordinary interlocutory application.11 I agree with that approach. Further, adopting a starting point that such costs should be awarded only rarely operates as a disincentive to parties to reach agreement on costs. Much Court time is wasted dealing with costs applications as a result.
[40] Accordingly, Kevler will be awarded costs under this heading but on a 2A basis. The issues that arose were few in number and not difficult. Further, Kevler filed submissions and submissions in reply. It was not granted leave to file submissions in reply, nor was that necessary in my view. It was also the wrong course for Kevler’s counsel to advise the Court that despite the timetable, Kevler reserved the right to file reply submissions. The appropriate course was to seek leave to file such submissions if it was necessary to do so.
11 At [HRPt14.17(13)].
Result
[41] Kevler is awarded costs of $13,862 and disbursements of $1,330 in accordance with the attached schedule.
O G Paulsen Associate Judge
Solicitors:
Parry Field Lawyers, Christchurch
Tom Evatt & Co (J Turnbull), Christchurch
Schedule
Kevler Homes Christchurch Ltd v Carston Developments Ltd CIV-2022-409-96
Item Number
Description
Date
Days
Amount
37
Filing originating application and supporting affidavit (2B)
11 March 2022
2
4,780
11
Filing memorandum (2A)
23 March 2022
0.2
478
29
Sealing interim order (2B)
25 March 2022
0.2
478
11
Filing memorandum (2A)
27 April 2022
0.2
478
40
Preparation of written submissions (2B)
27 June 2022
1.5
3585
41
Preparation by applicant of bundle for hearing (2B)
27 June 2022
0.6
1,434
11
Filing memorandum (2A)
5 July 2022
0.2
478
29
Sealing final order that caveat not lapse (2B)
8 July 2022
0.2
478
40
Costs submissions (2A)
15 July 2022
0.5
1,195
29
Sealing costs order (2B)
0.2
478
TOTAL
13,862
Disbursements (including GST)
3
Filing fee for originating application
540
51
Sealing fee for interim order caveat not lapse
50
Scheduling fee
640
51
Sealing fee for final order caveat not lapse
50
51
Sealing fee for costs order
50
TOTAL (ex GST)
1,330
$15,192
0
5
0