Kuoch v Ganda

[2022] NZHC 1150

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2178 [2022] NZHC 1150

UNDER

Section 261 of the Property Law Act 2007 and Part 19 of the High Court Rules 2016

IN THE MATTER OF

A lease of premises at 27 Chartwell Avenue, Glenfield, Auckland

BETWEEN

JOHNLEE HUA MINH KUOCH

Applicant

AND

MAHESH GANDA, MANI GANDA and

RAMAN DIYAR GANDA as trustees of the Morar Family Trust

Respondent

On the papers:	At Auckland
Judgment:	24 May 2022

JUDGMENT OF POWELL J

[on Costs]

This judgment was delivered by me on 24 May 2022 at 3.30 pm pursuant to R 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:
Fortune Manning, P O Box 4139, Auckland

(B Rooney, Vulcan Building Chambers, Auckland)

Thomas and Co, New Lynn, Auckland

(L Ponniah, P O Box 55022, Eastridge, Auckland)

KUOCH v GANDA & Ors (Costs) [2022] NZHC 1150 [24 May 2022]

[1]                 This judgment on costs follows my earlier decision granting the application of John Lee Kuoch pursuant to s 261(1)(a)(i) of the Property Law Act 2007 to renew the lease of the premises where his laundromat business is located.1

[2]                 Having granted the application sought I also ordered costs against the respondents as trustees of the Morar Family Trust, the owner of the premises on which Mr Kuoch’s business is located (“the trustees”). In the event costs could not be agreed I set out a timetable for the filing of submissions. As there was no agreement and submissions have been filed, I now determine the costs issue.2

The position of the parties

[3]                 On behalf of Mr Kuoch, Mr Rooney seeks indemnity costs against the trustees totalling $21,900 plus GST, together with disbursements of $1,409.99, a total sum of

$26,594.99. In Mr Rooney’s submission the trustees acted unreasonably in opposing the application and in support of that proposition relies on the various comments made by me in the course of my first judgment.

[4]                 The trustees oppose any award of costs notwithstanding I have already determined that costs are properly payable, essentially for the same reasons advanced in the hearing of the substantive application. In addition, Mr Ponniah on behalf of the trustees, submits with reference to the decision of the Court of Appeal in Cunningham v Butterfield3 that as the granting of relief to Mr Kuoch was an indulgence it thereby provides a basis for costs either lying where they fall or otherwise tempers the imposition of increased  or  indemnity  costs  as  sought  by Mr Kuoch. The effect of this submission is that if costs are awarded these should be imposed on a 2B basis.

Discussion

[5]                 Having considered the submission of counsel against the conclusions reached in my substantive judgment, I confirm that while costs are payable by the trustees,

1      Kuoch v Ganda [2022] NZHC 452.

2 At [38].

3      Cunningham v Butterfield [2014] NZCA 213.

these are appropriately limited to scale costs on a 2B basis and not the indemnity costs sought by Mr Kuoch.

[6]                 First, Cunningham v Butterfield, relied upon by the trustees, is clearly distinguishable from the present case. While the Court was clear that there is no general rule that a lessor is entitled to costs for unsuccessfully opposing an application for relief, it otherwise made it clear that what was required was a principled application of the rules.4 In that case the Court was satisfied that in addition to receiving an indulgence the lessee was in breach of his contractual obligations and presumably responsible for the dispute that had arisen.5 These factors had to be considered against the lessee’s success in the litigation and earlier findings that the issues affecting the relationship were not “one-sided”.6

[7]                 Given these considerations the Court did not take issue with the trial judge’s conclusion that costs appropriately lay where they fell.7

[8]                 None of the issues considered by the Court of Appeal in Cunningham as tempering the liability to costs apply in this case, for the reasons already set out in my substantive judgment.8

[9]                 I turn now to the issue of the quantum of the costs payable and whether indemnity costs are appropriate.

[10]              Rule 14.6(1)(b) of the High Court Rules 2016 defines indemnity costs as the “actual costs, disbursements and witness expenses reasonably incurred by a party”. This can be contrasted with increased costs, being increased costs “otherwise payable under rules 14.2 – 14.5”.

[11]              Rule 14.6(4) gives a Court a discretion to order a party to pay indemnity costs if:

4 At [57].

5 At [58].

6 At [58].

7 At [59].

8      Kuoch v Ganda, above n 1.

(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[12]              The only ground with possible relevance in this case is r 14.6(4)(a), that the trustees acted “unnecessarily” in opposing Mr Kuoch’s application. Pursuing an unnecessary  step  is  also  a  justification  for  increased  costs  in  accordance  with  r 14.6(3)(b)(ii) of the High Court Rules, making it clear that simply taking an unnecessary step is insufficient for indemnity costs.

[13]              The difference between the different types of costs were explained in the leading authority on indemnity costs, the Court of Appeal in Bradbury v Westpac Banking Corporation.9 In particular the Court noted:10

(a)standard scale applies by default where cause is not shown to depart from it;

(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and

(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[14]                While for the reasons I set out in my substantive judgment there was no merit in the trustees’ response to Mr Kuoch’s application, it cannot be said that the trustees

9      Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.

10 At [27].

have acted “badly or very unreasonably”. Instead while, as Mr Rooney noted, there was an element of unreasonableness in the trustees’ opposition to the application in the sense that the matters raised were misconceived, when the nature of the present application is taken into account, it does not warrant any form of increased cost.

[15]              In particular, where in conventional litigation increased costs may well have been appropriate in this case it must be always borne in mind, as Mr Ponniah correctly noted, that the application was necessary because  of an  oversight  on the  part  of Mr Kuoch. Therefore had the trustees not actively opposed the application there could have been no basis for costs against the trustees. Instead the trustees, by pursuing a range of objections that were without merit, put themselves into the same category as the plaintiffs in Ponsonby Mall Trust Ltd v NZ Food Industries Ltd, a decision where scale  costs  were  awarded  against  the  landlords,  and  indeed   relied  upon  by   Mr Rooney.11 In that case Asher J explained that while it was appropriate for costs to be awarded against the landlord in similar circumstances to that existing in the present case, with regard to the quantum of those costs Asher J explained:12

I am not prepared to order that there be any increase in the costs to be paid because of the plaintiffs’ conduct of the litigation. While they did refuse the Calderbank offer, that refusal is taken into account in the decision to give the defendant costs in the proceeding that arose from the defendant’s error. The Calderbank offer has already been weighted in the decision to give the defendant costs at the scale rate.

For this reason I disregard the material provided as to the actual costs of the defendant. The whole purpose of the new rules is to enable the Court to make costs orders on the basis of scale, rather than actual costs, and there is no reason to depart from that approach in this case.

[16]              For the same reasons set out by Asher J I likewise conclude that scale costs, and not increased costs let alone indemnity costs, are appropriate in the present case.

[17]              Based on Mr Rooney’s calculation of the relevant steps I am therefore satisfied that costs in the sum of $10,994 are payable (based on 4.6 days at $2,390 per day) together with the disbursements of $1,409.99 making a total of $12,403.99.

11     Ponsonby Mall Trust Ltd v NZ Food Industries Ltd HC Auckland CIV-2005-404-3631, 8 March 2006.

12     At [21] and [22].

Decision

[18]              The trustees are to pay Mr Kuoch $10,994 in costs together with $1,409.99 in disbursements, a total of $12,403.99.

Powell J