Khalesi v Lane
[2022] NZHC 1793
•25 July 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2015
[2022] NZHC 1793
IN THE MATTER
AND
of the Land Transfer Act 1952 IN THE MATTER
of Caveat No.12091076.2 and Caveat No.12091076.1
BETWEEN
SAM KHALESI and SHAHIN KHAYAMI
Applicants
AND
LESLIE PHILLIP LANE
First Respondent
FAST PARK DEVELOPMENTS LIMITED
Second Respondent
Hearing: On the papers Appearances:
A Gilchrist for the Applicants
CFL Godinet for the Respondents
Judgment:
25 July 2022
COSTS JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 25 July 2022 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
Churton Hart & Divers Ltd, Auckland Henley-Smith Law, Auckland
A Gilchrist, Auckland CFL Godinet, Auckland
KHALESI v LANE & ANOR [2022] NZHC 1793 [25 July 2022]
Introduction
[1] The applicants seek costs in respect of their successful application for Caveats not to lapse until further order of the Court.
[2] In my decision dated 13 April 2022, I recorded that, as the successful party, the applicants were entitled to costs.1 I further recorded that prior to filing the application to sustain the caveats, the applicants had proposed to the respondents that the parties proceed directly to the substantive proceedings with steps taken to sustain the caveats in the meantime. I advised that my preliminary view was that there was clearly a caveatable interest and that this would have been an appropriate course.
[3] I asked the parties to confer and attempt to agree costs. If that was not possible, the parties were to file memoranda.
[4] Unfortunately, the parties were unable to agree and costs memoranda have now been filed.
Costs claimed
[5] The applicants seek, as a minimum, 2B costs of $13,264.50 together with disbursements of $1,533. In addition, they submit that an uplift of 25 per cent pursuant to r 14.6 of the High Court Rules 2016 is justified.
[6]Rule 14.6 relevantly provides:
14.6 Increased costs and indemnity costs
…
(3)The court may order a party to pay increased costs if –
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by –
…
(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;
1 Khalesi v Lane [2022] NZHC 787 at [69].
[7] The applicants submit that there was always a caveatable interest and that the proceedings were therefore unnecessary. They rely on their initial offer to the respondents to proceed straight to substantive proceedings with orders by consent to sustain the caveats. A draft of the statement of claim in the substantive proceedings was provided to the respondents on 6 October 2021 to which there was no response. The application to sustain the caveats was therefore filed together with separate substantive proceedings seeking specific performance on the same date.
[8] The applicants submit that because they filed substantive proceedings at the same time, the respondents have pursued an unnecessary step or argument that lacked merit by opposing the application to sustain the caveats.
[9] In those circumstances, the applicants say it is appropriate for there to be a 25 per cent uplift on scale costs increasing costs by $3,316.13 for a total of $16,580.63. Counsel confirms that this is still less than actual costs and that the disbursements claimed remain unaltered.
[10] In addition, the applicants have attached to their memorandum copies of three communications sent to the defendants seeking agreement on costs following judgment.
[11] The first, sent to counsel for the respondents on 14 April 2022 stated that if costs could be reached by agreement, the applicants would limit their claim to 2B costs. They sought a response within 10 working days and attached a schedule of 2B costs and disbursements.
[12] Following this correspondence, the parties conferred in relation to a timetable for the substantive proceedings. On 3 May 2022, in correspondence in respect of a suggested joint memorandum, the applicants advised that if they did not hear from the respondents on the caveat costs issue they would file submissions.
[13] The applicants sent a further reminder email on 5 May stating that, unless a prompt reply was received, a costs memorandum would be filed not necessarily limited to the amount earlier indicated.
[14] Counsel for the applicants states that no response has been received to any of the costs correspondence.
Respondents’ position
[15] The respondents submit that costs ought to be reserved pending determination of the substantive proceeding – CIV-2021-404-2017. The respondents say, in the alternative, if costs are fixed they should be on a 2B basis with no uplift and to be paid within seven days. The respondents accept that 2B costs are as calculated by the applicants and amount to $13,264.50 with disbursements of $1,533.
[16] Counsel for the respondents submits that whilst I have held it is reasonably arguable that the applicants have a caveatable interest, ultimately the applicants may fail in the substantive proceedings. If so, it will mean the caveats should not have been lodged in the first place. The respondents’ position is that costs ought to be reserved as it would be “abhorrent to award costs to the applicants if it is ultimately determined that the applicants’ case is misconceived”.
[17] The respondents deny that they entered into an oral agreement for the sale and purchase of the properties and that there was always a caveatable interest. The respondents submit that the law regarding part performance of an oral contract for the sale and purchase of land is complex and that credibility findings may, in the long run, be in favour of the respondents. The respondents do not accept that the proceedings were therefore unnecessary as the Court needed to determine whether there was a caveatable interest. Furthermore, the respondents submit that the affidavit evidence of both parties will be of assistance in the substantive proceedings, likely forming the basis of the briefs of evidence.
[18] Finally, the respondents submit that they have not acted unreasonably and the mere fact that a party fails in advancing a legal argument does not justify increased costs under r 14.6(3)(b)(iii).
Should increased costs be ordered?
[19] I have not been dissuaded from my preliminary view that there was clearly a caveatable interest and that the appropriate course would have been for the parties to seek consent orders for the caveats not to lapse and to proceed directly to the substantive proceedings. This was clearly proposed to the respondents prior to filing the application for the caveats not to lapse.
[20] The threshold for caveats to be maintained is only that it is reasonably arguable that the party has an interest in the land. The settled principles governing an application that a caveat not lapse make it clear that an order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained. Although this case involved applying the doctrine of part performance as there was no written agreement, there was sufficient evidence of a deposit being paid which had been held in previous cases to be an unequivocal act of part performance.
[21] The respondents say that parties are entitled to advance and defend claims and that nothing in r 14.6 applies where the respondent did not take or pursue an unnecessary step or argument lacking merit. They say they did not act unreasonably, and the mere fact that a party fails does not merit increased costs.
[22] However, in these caveat proceedings, where the test for removal is that it is patently clear that the caveat cannot be maintained, the respondent’s opposition might come close to being characterised as “hopeless”.2
[23] I consider therefore that this case does fall within r 14.6(3)(b)(iii). In any event, the scenarios listed under r 14.6(3) where increased costs may be appropriate are not exhaustive. The Court retains a discretion under r 14.6(3)(d) to award increased costs where “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”.
2 Contrast Ngui v Ngui [2020] NZHC 1378 at [17] where van Bohemen J refused to grant increased costs where the plaintiff’s legal position was stronger than the defendant’s but “the defendant’s position was not hopeless”.
[24] I consider an award of increased costs is appropriate in these circumstances where a draft of the substantive proceedings was provided prior to filing the caveat application, where it was proposed agreement should be reached for the caveats not to lapse and where the respondents did not engage in relation to costs following the decision.
What is the appropriate uplift?
[25]The applicants seek a 25 per cent uplift.
[26] In Holdfast NZ Ltd v Selleys Pty Ltd, the Court of Appeal held that when calculating increased costs, noting the practical function of the scale, “an increase of 50% on scale costs should therefore grant the costs-claiming party a fair recovery for the step unnecessarily forced on it”.3 However, uplifts of less than 50 per cent are routinely granted where the Court considers it appropriate to do so.
[27] Where the uplift is claimed on the basis that the proceeding as a whole was unnecessary, the uplift is applied to all steps. In Broadspectrum (New Zealand) Ltd v Nathan, the Court of Appeal confirmed an earlier statement of the Court in NR v MR that, where unmeritorious proceedings were brought that were inherently unlikely to succeed:4
[52] In a case such as this, we do not consider that there needs to be a blow by blow comparison between time properly taken in respect of a particular step and the appropriate uplift for each such step. All of the steps that have been necessary to oppose the application are steps that should not have been necessary, and have been taken at a cost that it should not have been necessary to incur.
[28] In both NR v MR and Broadspectrum (New Zealand) Ltd v Nathan, the Court of Appeal applied a 50 per cent uplift to reflect unnecessary steps taken and arguments with a lack of merit.
3 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47].
4 NR v MR [2014] NZCA 623, (2014) 22 PRNZ 636 at [52]; cited in Broadspectrum (New Zealand) Ltd v Nathan [2017] NZCA 434 at [57].
[29] In Mueller v Handren, Heath J considered that the respondent had acted “improperly or unnecessarily”, in (inter alia) opposing an application for probate when no proper grounds to do so existed.5 Although his Honour accepted indemnity costs might be ordered, as a matter of discretion he awarded a 75 per cent uplift on scale costs (the unsuccessful party in that case having acted particularly reprehensibly).
[30] In Jarden v Lumley General Insurance (NZ) Ltd the Court of Appeal upheld the High Court’s 25 per cent uplift where the claim was misconceived, and the unsuccessful party exposed themselves to a risk of increased costs by pursuing it.6
[31] In this case I have held that there is clearly a caveatable interest. That position was put to the respondents by the applicants prior to this application being filed, and a sensible course proposed to reach the substantive proceeding with minimal cost. By failing to accept that and opposing the application with no proper grounds, both parties (and the Court) were put to unnecessary cost in these caveat proceedings in terms of both time and money.
[32] I consider the opposition was misconceived and by maintaining that opposition, despite the applicants offering a sensible route to the substantive trial, the respondents were putting themselves at risk of increased costs by necessitating an application that the Court was bound to grant.
[33] Some of the costs incurred in this application may retain some residual value for the substantive proceeding: for example, the affidavit evidence adduced in this proceeding. But it is more appropriate for this to be taken into account in setting costs in the substantive proceeding when the final result has been determined.
[34]In my view, the 25 per cent uplift sought is appropriate in the circumstances.
5 Mueller v Handren HC Auckland, CIV-2007-404-7103, 16 June 2009 at [25].
6 Jarden v Lumley General Insurance (NZ) Ltd [2018] NZCA 6 at [21].
Result
[35] The respondents are to pay costs to the applicant on a 2B basis with a 25 per cent uplift in the amount of $16,580.63 plus disbursements of $1,533.
Associate Judge Sussock
0
6
1