Lexus Trustees Limited v Fenning

[2019] NZHC 1109

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2944

[2019] NZHC 1109

BETWEEN

LEXUS TRUSTEES LIMITED and SALLY

ANNE JUDITH RIDGE as trustees of the 24 TRUST

Plaintiffs

AND

WARREN IAN FENNING

Defendant

Hearing:	On the papers
Appearances:	J McBride and C Morris for Plaintiffs PB Friedlander for Defendant
Judgment:	20 May 2019

JUDGMENT OF WALKER J

(Costs)

This judgment was delivered by me on 20 May 2019 at 4:30 p.m. pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors:           Cook Morris Quinn, Auckland

Friedlander & Co, Auckland

Counsel:            J McBride, Auckland

WGC Templeton, Auckland

LEXUS TRUSTEES LTD and RIDGE as trustees of the 24 TRUST v WARREN IAN FENNING [2019] NZHC 1109 [20 May 2019]

[1]                   This proceeding arises out of a claim by the defendant, Warren Fenning, that he has a beneficial interest under an implied or resulting trust in a residential property at 15 Ardmore Road, Herne Bay. The property is owned by the plaintiffs, as trustees of the 24 Trust.

[2]                   On 6 July 2017 Mr Fenning lodged a caveat against the title to the property, reference 10839459.1 (the caveat). The plaintiffs brought this proceeding seeking a declaration that they did not own the property on trust for Mr Fenning.

[3]                   Mr Fenning responded by filing a defence and counterclaim, repeating the claims in the caveat that the property was held on trust for him.

[4]                   After completion of interlocutories and the exchange of witness statements, the proceeding was set down for a five-day trial commencing 13 May 2019.

[5]                   On 25 March 2019, Mr Fenning discontinued his counterclaim and withdrew the caveat. The practical effect of this discontinuance is that the declaration sought by the plaintiffs is redundant.

[6]                   The plaintiffs now seek costs on the defendant’s abandoned counterclaim and on their own claim for a declaration. The costs are sought under r 15.23 of the High Court Rules 2016:

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.

[7]                   Rule 15.23 applies to a counterclaim plaintiff. In short, a counterclaim plaintiff who discontinues a proceeding against a counterclaim defendant must pay costs under the same provision, unless the counterclaim defendant otherwise agrees or the Court otherwise orders. This is by reason of the definitions of “plaintiff” and “proceeding” in r 1.3 of the High Court Rules.

[8]                   The cost category for this proceeding has already been set at 2 and the parties agree that band “B” is appropriate. The contest between the parties is that the plaintiffs seek a 50 per cent uplift on 2B costs under r 14.6(3)(b).1 The grounds relied on are that:2

(a)Mr Fenning took or pursued unnecessary steps or arguments that lacked merit; and

(b)Mr Fenning failed, without reasonable justification, to accept an offer of settlement.

[9]                   The defendant contends that there was a reasonable basis to reject the early offer of settlement and that it only became necessary to withdraw the claim after subsequent investigation and disclosure during trial preparation coupled with funding difficulties.3 The defendant submits that there is no need to depart from 2B costs or any justification for an uplift. He does not seek to challenge any item in the costs calculations annexed to the plaintiffs’/counterclaim defendants’ memorandum.

[10]               I accept that, in principle, increased costs may be awarded to a counterclaim defendant on a discontinuance.4 The Court in this situation will not normally consider the merits of a discontinued claim, although there may be some circumstances where the merits are so obvious that they should influence the costs issue.5

[11]               Both grounds relied on to support a 50 per cent uplift require me to consider the competing merits. In the circumstances before me the merits are not sufficiently obvious such that they should influence the question of costs.

[12]It follows that I am not prepared to make an order for increased costs.

1      Plaintiffs’ costs memorandum seeking costs on discontinuance dated 11 April 2019.

2      Letter from Mr Morris (the plaintiffs’ solicitor) to Mr Friedlander (Mr Fenning’s solicitor) dated 30 November 2017.

3      Defendant’s costs memorandum dated 18 April 2019.

4      Lesa Systems Limited v Canzac Limited HC Christchurch CIV-2006-409-624, 16 May 2006.

5      North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 at 186.

[13]               I make an order for costs of $33,673 on a Category 2B basis as per the costs schedule attached to the plaintiffs’/counterclaim defendants’ memorandum along with disbursements of $1,350.

Walker J