Lay v Taranaki Property Specialists Ltd

[2013] NZHC 1379

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV 2011-443-126 [2013] NZHC 1379

BETWEEN  RODNEY VICTOR LAY Plaintiff

ANDTARANAKI PROPERTY SPECIALISTS LTD

First Defendant

RENTAL MANAGEMENT LIMITED Second Defendant

Hearing:                   (on the papers)

Counsel:                  S W Hughes QC for Plaintiff

S Herbert for First Defendant
No appearance by, or on behalf of Second Defendant

Judgment:                11 June 2013

JUDGMENT OF HEATH J

This judgment was delivered by me on 11 June 2013 at 4.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

LAY v TARANAKI PROPERTY SPECIALISTS LTD [2013] NZHC 1379 [11 June 2013]

Background to proceeding

[1]      On 16 March 2011, Mr Lay issued proceedings in this Court seeking relief against both Taranaki Property Specialists Ltd and Rental Management Ltd arising out of an alleged breach of a restraint of trade clause contained in a shareholding agreement. The agreement was between Mr lay and Taranaki Property Specialists, in relation to their shareholding in another company called Taranaki Rentals Ltd.  At material times, Taranaki Property Specialists was under the control of Mr Christiansen.

[2]      At  the  time  that  the  proceeding  was  issued,  Mr  Lay  sought  an  interim injunction to restrain Taranaki Property Specialists from breaching the restraint of trade clause.

[3]      On 18 March 2011, the Registrar referred Mr Lay’s proceeding to me.   I made directions for the prompt service of proceedings on Taranaki Property Specialists and Rental Management and timetabled the provision of documents in opposition.  A telephone conference was scheduled for 1.15pm on 24 March 2011 to determine whether, and if so what, interim orders were required.1

[4]      The telephone conference did not proceed because, on 22 March 2011, I was informed that counsel had agreed on interim orders, namely:2

[a]       Taranaki  Property  Specialists  Ltd  shall  immediately  delete  all references to Rental Management Ltd from its website.

[b]       Taranaki Property Specialists Ltd shall not refer any further business to Rental Management Ltd.

[c]       Rental  Management  Ltd  is  prohibited  from  advertising  itself  as having any connection with Taranaki Property Specialists Ltd or Harcourts New Plymouth.

Orders were made in those terms.

1      Lay v Taranaki Property Specialists Ltd HC New Plymouth CIV 2011-443-126, 18 March 2011, at paras [2], [3] and [4] (Minute).

2      Lay v Taranaki Property Specialists Ltd HC New Plymouth CIV 2011-443-126, 22 March 2011, at para [2] (Minute (No. 2)).

[5]      While   those   orders   remained   in   force,  Taranaki   Property   Specialists undertook that it would make no alteration to its shareholding or management structures, so as to defeat the terms of the restraint of trade covenant.3

[6]      A case management conference was held before Miller J on 12 May 2011. The Judge raised with counsel the existence, in the shareholder agreement, of an alternative dispute resolution clause.   He stated that “on the face of it the Court would stay the proceeding for ADR if asked by any party”.4

[7]      In a Minute, issued on 27 June 2011, I recorded that counsel for Mr Lay had indicated a desire to proceed through alternative dispute resolution.  On that basis, I stayed the proceeding to allow the parties to resolve their dispute in accordance with the contractual provisions.5

[8]      On 4 March 2013, Mr Lay filed a notice of discontinuance.  Costs remained at large.  Timetabling directions for the filing of submissions on costs were made on

12 March 2013.

[9]      The Registrar has referred the documents filed to me to determine questions of costs.  The delay in dealing with the application since the last memorandum was filed on 3 May 2013 has been due to my absence overseas on sabbatical leave.

Costs determination

[10]     The primary rule is that a plaintiff who discontinues his or her proceeding will be liable to meet the costs of the opposing party.  Rule 15.23 of the High Court Rules provides:

15.23 Costs

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

3 Ibid, at para [3].

4      Lay v Taranaki Property Specialists Ltd HC New Plymouth CIV 2011-443-126, 12 May 2011, para [2].

5      Lay v Taranaki Property Specialists Ltd HC New Plymouth CIV 2011-443-126, 27 June 2011, at paras [2] and [3] (Minute (No. 3)).

[11]     In Kroma Colour Prints Ltd v Tridonacato NZ Ltd,6  the Court of Appeal considered the type of evidence necessary to displace that presumption.   With reference to the predecessor of r 15.23, Priestley J, delivering the judgment of the Court of Appeal, said:

[12]      The Judge correctly stated the law on r 476C.  She referred to North Shore City Council v Local Government Commission  (1995) 9 PRNZ 182, noting that  the  presumption  in  favour  of  awarding costs  to  a  defendant against whom a proceeding had been discontinued may be displaced if there were just and equitable circumstances not to apply it.   A court would not speculate on respective strengths and weaknesses of the parties’ cases.  The reasonableness of the stance of both parties, however, had to be considered. She also referred to Oggi Advertising Limited v McKenzie (1998) 12 PRNZ

535 which recognised that the discretion reposing in r 46 could override the general principles relating to discontinuance.

[12]     Taranaki  Property  Specialists  seek  one  set  of  costs  (Rental  Management having taken no active steps in the proceeding), to be calculated on a 2B basis.  They total $6,500, plus reasonable disbursements.

[13]     Taranaki Property Specialists has declined to provide to Mr Lay’s advisers copies of invoices rendered.   Because the relationship of the parties is “ongoing”, counsel for Taranaki Property Specialists submits that there “is commercial and strategic value in the confidentiality of [its] litigation budget”.

[14]     Like counsel for Mr Lay, I find the non-disclosure of the costs incurred puzzling; particularly in light of the principle that an award of costs should not exceed those actually incurred.7   Notwithstanding a submission to the contrary, “the scale allocation of costs [will] be displaced if such an award would exceed costs actually incurred by the party claiming” and the Court will require some evidence of actual costs incurred; particularly in a case such as this where, on the face of it, a limited number of attendances were required and no contested applications resulted.8

[15]     This is a case in which the affidavit evidence does not advance each party’s

position on costs significantly.   For that reason, it is unnecessary to deal with a

6      Kroma Colour Prints Ltd v Tridonacato NZ Ltd (2008) 18 PRNZ 973 (CA).

7      High Court Rules, r 14.2(f).

8      For example, see Zhao v New Zealand Law Society [2012] NZHC 3112 at para [6](b) and [11] (Kós J).

submission that Mr Lay’s affidavit is inadmissible through want of proper execution.

I proceed on the basis of the record and the memoranda provided by counsel.

[16]     The history of the proceeding to which I have referred, demonstrates that few attendances were required from the solicitors and counsel for Taranaki Property Specialists once they had considered the extensive documentation filed in support of the application for an interim injunction.  That is the only part of the proceeding in respect of which a significant period of time should be allowed for personal attendances.

[17]     I am not satisfied that a claim for 6.7 days is reasonable, in the circumstances of this particular case.   Indeed, the schedule put forward by counsel for Taranaki Property Specialists tends to distort the periods during which significant costs are likely to have been incurred.

[18]     In my view, the presumption that Mr Lay should pay costs has not been displaced.  However, in the absence of any evidence as to the amount of actual costs incurred by Taranaki Property Specialists, I take a conservative approach to the quantum to be fixed.   Using the 2B costs calculated as a benchmark and taking account of the fact that most of the significant attendances would have been incurred on a relatively urgent basis immediately after service of the proceeding, I consider that an award of $2,500, inclusive of disbursements, is an appropriate order for costs.

Result

[19]     Mr Lay shall pay costs to Taranaki Property Specialists in the sum of $2,500, inclusive of disbursements.  As between Mr Lay and Rental Management, no order

for costs is made.

P R Heath J

Delivered at 4.30pm on 11 June 2013.

Solicitors:

Billings, New Plymouth
Shane Herbert, New Plymouth

Counsel:

S W Hughes QC, New Plymouth