Krause v Brady & Walsh Limited

[2023] NZHC 588

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-342

[2023] NZHC 588

BETWEEN

JANE MEREDITH KRAUSE

Plaintiff

AND

BRADY & WALSH LIMITED

Defendant

Hearing:	On the papers
Appearances:	T Shiels KC for Plaintiff S Wroe for Defendant
Judgment:	22 March 2023

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Costs]

[1]    In my reserved decision dated 9 December 2022 I entered summary judgment for the plaintiff, Ms Jane Krause.1 The issue in the case was whether the defendant, Brady & Walsh Ltd, was entitled to terminate a sale and purchase agreement for a townhouse, as it had purported to do, or whether the defendant had earlier elected not to terminate, thereby waiving the right to do so.

[2]    In the final paragraph of my judgment I recorded my preliminary view that the plaintiff was entitled to costs, and, as the issue had been raised in argument, I also indicated that it was not obvious to me that there was any basis for an award of indemnity or increased costs.

1      Krause v Brady & Walsh Ltd [2022] NZHC 3587.

KRAUSE v BRADY & WALSH LIMITED [2023] NZHC 588 [22 March 2023]

[3]    The parties having been unable to agree on costs. Counsel have filed and served memoranda as to these. The Court must now deal with the issue.

[4]    The plaintiff says that the defendant declined to engage after her case had been laid out, including citing recent Court of Appeal authority, Jansen v Whangamata Homes Ltd.2 She says that her narrative of events was largely unchallenged and there was no finding materially different from it by the Court. In those circumstances, the plaintiff contends that the defendant acted unreasonably in defending the claim, and seeks indemnity costs (of $129,690.65) pursuant to r 14.6(4)(a) of the High Court Rules 2016, or, alternatively, a 50 per cent uplift in scale costs under r 14.6(3).

[5]    Further, the plaintiff submits that, if the Court is minded to award scale costs, band C is appropriate for the preparation of the summary judgment application. This, it is said, is because the full history of communications and dealings between the parties was pivotal and, while the plaintiff’s narrative was largely unchallenged, the defendant’s approach meant that the plaintiff was nonetheless required to prove it.

[6]Finally, the plaintiff seeks costs for this costs application.

[7]    The defendant accepts that the plaintiff is entitled to costs, but submits that these should be limited to scale costs on a 2B basis. On its behalf, Ms Wroe submits that the proceeding was straightforward, and did not involve novel or complex issues of fact or law. She says that this was a single issue case.

[8]    The defendant disputes the contention that its actions warrant an award of indemnity or increased costs, referring to my observation that “the defendant company was entitled to defend the application and, on its behalf, Ms Wroe said everything that could be said and nothing more”.3 Ms Wroe contends that there was a “genuine evidential conflict concerning a relevant issue”4 and that defending the application on the basis of that dispute did not amount to improper or unreasonable conduct that might justify indemnity or increased costs.

2      Jansen v Whangamata Homes Ltd [2006] 2 NZLR 300 (CA).

3      Krause v Brady & Walsh Ltd, above n 1, at [53].

4 At [45].

[9]    The defendant points to what it says is an inconsistency in the plaintiff’s position. On the one hand, the defendant says, the plaintiff contends that the case was so obvious that it should have settled. On the other hand, the plaintiff puts forward a claim for actual costs of almost $130,000 as being reasonable.

[10]   Further, the defendant says it was the plaintiff who did not respond to an offer made to her and refused an invitation to meet with a director of the defendant company to discuss settlement. The only course then available to the defendant was to “back down or defend the application”.

[11]   In relation to Jansen, the defendant says that, being unable to convince the Court to distinguish the present case from earlier authority is not a sufficient basis to award indemnity or increased costs. The defendant acknowledged the similarities between the cases, but argued that there were differences and that Jansen should not determine the outcome here.

[12]   In summary the defendant’s position is that the plaintiff has not shown that the position taken by the defendant unnecessarily contributed to the time and expense of the proceeding, leaving no basis for increased or indemnity costs.

[13]   The defendant also opposes the claim for costs on the costs application itself saying there is no “special” aspect of the case nor any “exceptional circumstances” arising in it to warrant such an award.5 This, Ms Wroe contends, is not a case where the defendant has clearly advanced an unmeritorious argument; where the costs question involved some complexity or genuine dispute requiring counsel to put considerable time and incur considerable expenditure in addressing that ambiguity; or where the defendant failed to settle the costs dispute on reasonable terms.6

[14]   The defendant’s position is that scale costs on a 2B basis are appropriate, with no allowance for the costs application itself.

5      See, for example, Wenzhou Hongliang Trading Company Ltd v MSUT Trustee Ltd [2020] NZHC 2322 at [16]; and Khurana Trustee Ltd v Castle Backpacker K Road Ltd [2021] NZHC 1315 at [61].

6      David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [4.22]- [4.23].

[15]   This was a summary judgment hearing. The hearing occupied less than a day. It involved one issue of no great complexity. It would appear to be common ground that scale costs on a 2B basis amount to a figure just shy of $16,000. Yet, before the Court is an application for indemnity costs of close to $130,000.

[16]   The costs regime contained in pt 8 of the High Court Rules 2016 is intended to ensure justice between the parties while ensuring predictability.7 The Court will only depart from the well-established rules in exceptional cases, but will not allow the rules to act as a barrier to justice through their inflexible application.8

[17]   Internationally, there is a contrast between the two extremes of the “American rule” and the “English rule”, which require, respectively, and with exceptions, costs to lie where they fall or the unsuccessful party to cover the successful party’s full (if necessary taxed) costs. Much can and has been said about these approaches. Both are said to act as a barrier to accessing justice for different reasons.

[18]   The “American rule” is said to prevent prospective litigants from bringing meritorious claims for lack of funds and to enable economically stronger parties to oppress with vexatious or frivolous claims or defences. The “English rule” is said to disincentivise settlement and the litigating of novel and genuine issues by creating an often insurmountable cost risk.

[19]   Our costs regime — successfully or otherwise — aims to strike a balance between those extremes.9 Recovery of costs is provided for, but quantum is tempered by the requirement that, in all but exceptional cases, costs are determined by reference to scales. The approach is intended to further access to justice by enabling prospective litigants with a good claim to use the court process for the purpose of vindicating their rights in the knowledge that they will not have to bear the whole cost. Finally, having such a costs regime in place, where costs predictably follow the event, is designed to disincentivise meritless litigation.10

7      Bradbury v Westpac Banking Corporation [2009] NZCA 234.

8      Matthew Casey Sim’s Court Practice (looseleaf ed, LexisNexis) at [14.1.3].

9      As originally implemented through the High Court Amendment Rules 1999. See Glaister v Amalgamated Diaries Ltd [2004] 2 NZLR 606 (CA) at [14]-[16].

10     Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [33].

[20]   The scales are calibrated so as to facilitate recovery of two-thirds of the party’s costs.11 However, they are not meant to facilitate the recovery of two-thirds of the actual costs incurred, which are generally irrelevant. Instead, the aim is to enable the successful party to recover two-thirds of the costs that might reasonably be expected to have been incurred, given the nature of the proceeding.

[21]   Predictability is a key concern of the regime. Solicitors and counsel should be able to predict costs with a good deal of certainty for the benefit of clients as well as to prevent judicial time being spent on costs disputes.12 That principle is not advanced if the courts routinely have to consider applications for indemnity or increased costs and embark on in-depth analyses of the actions of the parties.13 Hence, the objective nature of the enquiry catering for “all but the most unusual of cases”.14

[22]   Objectivity and predictability being the key elements of the costs regime, the view I have reached is that the plaintiff’s application is untenable. In my assessment, this was, as counsel both say, a straightforward case. The objectives of the costs regime would certainly not be furthered were the Court to deviate from scale costs in a case such as this.

[23]   The case involved a genuine dispute about a dispositive (mixed factual and legal) issue. The mere fact that the defendant chose to defend the claim unsuccessfully does not justify an order for indemnity or increased costs, which are reserved for exceptional cases.15 An adverse award of scale costs is the usual consequence of an unsuccessful claim, and appropriate here.16 In this context, it is no part of the Court’s role to assess the reasonableness or otherwise of either party’s actual costs, which is a matter between the parties and their advisers.

11     High Court Rules 2016, r 14.2(1)(d).

12     Glaister v Amalgamated Diaries Ltd, above n 9, at [13].

13     Gough v Strahl [2014] NZHC 1038 at [23].

14 Glaister v Amalgamated Diaries Ltd, above n 9, at [16]; and Mansfield Dry Cleaners & Launders Ltd v Quinny’s Drycleaning (Dentice Drycleaners Upper Hutt) Ltd (2002) 16 PRNZ 662 (CA) at [27].

15 Bullock and Mullins, above n 6, at [3.16].

16 Gough v Strahl, above n 13, at [23].

[24]   I consider that scale costs on a 2B basis are appropriate here for each step involved in the proceeding. I am unpersuaded that any step, objectively assessed, required a greater than normal amount of time.17

[25]   As for the costs of this application for costs, again, there is no special aspect of the case or exceptional complexity that was raised in the costs dispute which would warrant such an award and, for that reason, I decline to make the order sought.

[26]   The plaintiff will have scale costs on a category 2, band B basis, together with such disbursements as may be allowed by the Registrar.

Associate Judge Johnston

Solicitors:

Gault Mitchell Law, Wellington for Plaintiff O’Regan Arndt Peters & Evans for Defendant

17     Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544 at [35].