Little v Warwick
[2019] NZHC 1622
•12 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2748
[2019] NZHC 1622
BETWEEN ANDREA LOUISE LITTLE and SDM TRUSTEE COMPANY LIMITED
PlaintiffsAND
RODNEY STEPHEN WARWICK and SALLY JOAN MACFARLANE WARWICK
Defendants
Hearing: On the papers Appearances:
M C Frogley for the Plaintiffs
W McCartney for the Defendants
Judgment:
12 July 2019
RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH ON COSTS
This judgment was delivered by me on 12 July 2019 at 11.30am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Rainey Law, Auckland
T S Carnachan, Auckland W McCartney, Auckland
LITTLE v WARWICK [2019] NZHC 1622 [12 July 2019]
[1] On 15 April 2019 I gave judgment dismissing an application by the defendants for summary judgment.1 I directed that if counsel could not agree on costs, memoranda were to be filed setting out the parties' respective claims. The plaintiffs filed a memorandum claiming costs, and Mr McCartney has filed a detailed memorandum in opposition. A reply memorandum was filed by the plaintiffs on 30 May 2019.
[2]I now give judgment on the plaintiffs' claim for costs.
Submissions for the plaintiffs
[3] Mr Frogley submits that costs should be awarded on a 2B basis. The amount the plaintiffs seek for costs and disbursements are set out in the following table:
Third Schedule Days Amount Item 23 Filing Opposition to Interlocutory Application 0.6 $1,338 Item 12 Appearance at call over Edwards J. 0.2 $446 Item 24 Preparation of written submissions 1.5 $3,345 Item 26 Appearance at hearing for principal counsel 1.0 $2,230 Item 27 Second counsel (justified by complexity of issues raised by the defendants) 0.5 $1,115 Subtotal $8,474 Disbursements Filing fee $110 Photocopying casebook of authorities @ 30c per page $75 Building Compliance Services NZ Ltd (Quentin Dagger) invoice attached $1,584 AS Jacobs (Graham Durkin – Expert) invoice attached $1,053 AS Jacobs (Graham Durkin – Expert) invoice attached $3,977 QPC Commercial (builders assisting Graham Durkin) invoice attached $609 Total costs and disbursements sought $15,882
[4] Mr Frogley submits that the defendants should be ordered to pay costs on the unsuccessful application, notwithstanding that their application was for summary judgment and summary judgment applications are not subject to the ordinary rule that, absent special reasons to the contrary, costs on an interlocutory application are to be fixed when the application is determined.2 Mr Frogley submitted that the defendants were in a position to assess the strengths and weaknesses of their case when they
1 Little v Warwick [2019] NZHC 822.
2 High Court Rules 2016, r 14.8.
proceeded with their application for summary judgment, and it should have been apparent from reading the plaintiffs' affidavits and notice of opposition that the summary judgment application could not succeed.
[5] Mr Frogley rejected any suggestion that the plaintiffs succeeded on the summary judgment application on the basis of matters that had not been properly pleaded by them (in particular, on the basis that the defendants had deceitfully or negligently withheld the Drybuild Report from the plaintiffs at the time the plaintiffs purchased the property). Mr Frogley submitted that the plaintiffs' claim squarely put in issue why Mr and Mrs Warwick elected not to make the Drybuild Report available, when they provided two other reports to prospective purchasers.
[6] Mr Frogley referred to paragraphs 20(n) and 27(k) of the plaintiffs' second amended statement of claim, where the plaintiffs pleaded that by providing the ROK Build letter and the Leakscan report to Ms Little, and not providing the Drybuild Report (and by their silence in not disclosing the Drybuild Report at the time) the defendants misrepresented a number of matters. First, the true condition of the house, secondly the extent of the targeted repairs that had been carried out, and thirdly the real reason why the repair work had been done. The defendants filed an amended statement of defence specifically pleading to these paragraphs, on 28 September 2018.
[7] Mr Frogley submitted that the basis on which the plaintiffs succeeded was also sufficiently made clear in the plaintiffs' notice of opposition to the summary judgment application. By the time the notice of opposition was served the defendants were fully aware of the plaintiffs' case. Nevertheless they filed five further affidavits and an amended application for summary judgment.
[8] Mr Frogley also noted that the Drybuild Report was not disclosed in the original affidavits filed by the defendants in support of their summary judgment application. A copy of the Drybuild Report was subsequently located by the plaintiffs' lawyers, and a copy of it was provided to the defendants' counsel on 9 July 2018. On receipt of the Drybuild Report, it ought to have been obvious to the defendants that their application for summary judgment had no prospect of success.
[9] Mr Frogley also submitted that the manner in which the defendants conducted the application unnecessarily added costs for the plaintiffs. The affidavits of the defendants' expert witness, Mr Maiden, were filed late which meant that the plaintiffs had to brief their experts twice and prepare experts' affidavits twice. Mr Maiden's affidavits should not have been filed at all given the defendants' concession at the hearing that Mr Maiden's evidence was disputed and should be disregarded for the purposes of the summary judgment application.
Submissions for the defendants
[10] Mr McCartney referred to a number of authorities in support of the submission that costs should be reserved. In the alternative, he submitted that, if costs are awarded, they should be reduced by 50 per cent of the amount that would otherwise have been awarded.
[11] Mr McCartney referred to two Court of Appeal decisions, both relating to unsuccessful defendants' applications for summary judgment. In the first of these cases, Miah v National Mutual Life Association of Australasia, the Court of Appeal noted that the successful plaintiff had succeeded on only some of the arguments he put up at the hearing; others had failed. There had been significant changes of position by the plaintiff in the course of the proceeding, and it was clear that the claims would be stoutly defended. In those circumstances the Court of Appeal directed that costs were to be fixed, but not paid until final resolution in the High Court.3
[12] The second Court of Appeal decision was Thompson v Turner Hopkins. The Court noted that the summary judgment defendant failed in the Court of Appeal only because of Mr Thompson's last-minute proposed amendment to the pleadings to add a cause of action. But for that late development, his appeal would have failed. In those circumstances, the Court did not think it appropriate to award costs to Mr Thompson in the Court of Appeal, even though his appeal succeeded.4
3 Miah v National Mutual Life Association of Australasia [2017] 2 NZLR 241 at [61].
4 Thompson v Turner Hopkins [2018] NZCA 197 at [73].
[13] Mr McCartney also relied on the decision of Dobson J in this Court in EBS v CAS, in which the Judge declined to determine costs on a defendant's unsuccessful summary judgment/strike-out application, reflecting the immediate outcome of the unsuccessful application. His Honour considered that costs should be reserved pending the substantive determination of the issues.5
[14] In Schmidt v Registrar-General of Land, Brewer J noted that there is some authority for the Court to depart from the ordinary rule that costs are reserved until the litigation has been determined on an unsuccessful summary judgment application.6 His Honour declined to award costs, however, on the basis that the summary judgment application related to a self-contained issue of law which arose on the plaintiff's pleadings, and the Registrar-General's summary judgment application was declined in order to give Ms Schmidt the chance to amend her claim to include a new allegation of fraud which had been raised at the hearing. Brewer J saw some force in the Registrar-General's submission that he was justified in bringing the application. In those circumstances, the Judge considered that it would be premature to decide the issue of costs. Costs were reserved for determination at the end of the proceeding.
[15] Mr McCartney mentioned two authorities where costs have been awarded on an unsuccessful defendant's application for summary judgment: Suharnan v Brookfields,7 and Judge v Dempsey.8 He submitted that Suharnan is distinguishable from the present case as the actual resolution was finally determined on the strike-out application. Nor was Suharnan a case where an amendment to the plaintiff's pleadings was necessary in order to avoid a strike-out or summary judgment. With respect to Judge v Dempsey, Mr McCartney noted that no amendment to the plaintiff's pleading was involved in that case, but there was little in the way of analysis.
[16] Mr McCartney's principal argument was that the plaintiffs did not in fact succeed on their pleaded causes of action, which were in deceit and negligent misrepresentation. He drew a distinction between negligent misrepresentation (pleaded by the plaintiffs) and misrepresentation by silence (the basis on which the
5 EBS v CAS [2014] NZHC 2929 at [90].
6 Schmidt v Registrar-General of Land [2015] NZHC 2438 at [22] – [27].
7 Suharnan v Brookfields [2013] NZHC 586.
8 Judge v Dempsey [2014] NZHC 2864.
plaintiffs were said to have succeeded), submitting that misrepresentation by silence requires a deliberate decision to withhold information, in order to create a false impression (citing Savill v NZI Finance Ltd,9 and Ladstone Holdings Ltd v Leonora Holdings Ltd 10), and that non-disclosure is not even a category of misrepresentation (referring to Law of Contract in New Zealand)11.
[17] Mr McCartney accepted that non-disclosure of the Drybuild Report was referred to in the plaintiffs' pleading, but he submitted that the reference was only one of many paragraphs, spanning three pages of pleadings and it was not clear that that particular part of the paragraph was what the plaintiffs were relying on, especially when the paragraph appeared in a cause of action entitled "Negligent Misrepresentation". He submitted that r 12.2(2) requires a defendant applying for summary judgment to show that none of the plaintiffs' causes of action can succeed. The rule does not oblige the defendants to also refute any other possible cause of action that might be discernible from the plaintiffs' various allegations of fact. Mr McCartney acknowledged that a plaintiff may be able to amend its pleading to avoid a summary judgment, but where that is the case (as it is here) there should be cost consequences for the plaintiff, as there were in Thompson, Miah, and Schmidt.
[18] In answer to the plaintiffs' assertion that it should have been obvious to the defendants that their application could not succeed, Mr McCartney repeated the submission that the defendants' application was properly brought on the basis that the facts alleged by the plaintiffs did not establish either of their pleaded causes of action.
[19] On the alleged failure of the defendants to disclose the Drybuild Report in their first round of affidavits, Mr McCartney submitted that the existence of a report was disclosed, although Mrs Warwick could not remember the name of the company that prepared the report or the repairs that had been recommended. She did not then have a copy of the report. Mr McCartney surmised that the plaintiffs must have obtained a copy of the Drybuild Report by making enquiries of house inspection companies.
9 Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145.
10 Ladstone Holdings Ltd v Leonora Holdings Ltd [2006] 1 NZLR 211 at [55].
11 Burrows, Finn and Todd, Law of Contract in New Zealand (6th ed. Lexis Nexis, 2018) at 11.4.4.
When she saw the report, Mrs Warwick confirmed that she believed it was the report she had referred to in her first affidavit.
[20] On the plaintiffs' claim for expert witnesses' expenses, Mr McCartney submitted that these costs are not costs particular to the summary judgment application. The same costs would have been incurred in briefing experts for trial, whether or not there had been a summary judgment application. On that basis, no extra cost has been caused by the late filing of Mr Maiden's evidence: the plaintiffs' experts needed to be briefed on what Mr Maiden had to say regardless of when this evidence was filed. Mr McCartney submitted that, if costs are awarded, they should not include expert's costs.
[21]Finally, Mr McCartney opposed the plaintiffs' claim for second counsel.
Plaintiffs' submissions in reply
[22] In reply, Mr Frogley referred to the Court of Appeal decision in NZI Bank Ltd v Philpott, where the Court of Appeal made it clear that the general rule as to costs on an unsuccessful summary judgment application can be departed from where a plaintiff has embarked on the summary judgment procedure erroneously, or in the certain knowledge that there is a bona fide question of fact or law which can be determined only after trial.12 Mr Frogley also submitted that the defendants put in issue the question of whether the work on the property required building consent, when they knew that issue was contested and was not suitable for determination on a summary judgment application. It was only at the hearing that the defendants conceded that the building consent issue would have to proceed to trial. Mr Frogley submitted that costs should be fixed and paid now, on the basis that the defendants' summary judgment application was inappropriate and has only served to increase the length and costs of the proceeding. He did not accept that this is a case where the plaintiffs succeeded only because of last-minute amendments to pleadings, or last minute changes of position.
12 NZI Bank Ltd v Philpott [1990] 2 NZLR 403.
[23] On Mr Maiden's affidavit, Mr Frogley said this was received after the plaintiffs' experts had prepared and sworn their affidavits. It caused unnecessary cost to the plaintiffs.
Discussion and conclusions
[24] I think that if, at the outset or prior to the hearing, the defendants should have appreciated that the summary judgment application could not succeed, but nevertheless persisted with the application, an award of costs to the plaintiffs will be appropriate. Mr Frogley submitted that, certainly upon receipt of the Drybuild Report, it ought to have been obvious to the defendants that their application for summary judgment had no prospect of success.
[25] I accept Mr Frogley's submission that, once regard was had to the contents of the Drybuild Report, it should have been clear that the case was not suitable for summary judgment. The ROK Build letter and the LeakScan report did not highlight any need for invasive investigations to determine the full extent of moisture ingress, whereas the Drybuild Report expressly recommended invasive testing, including to determine whether any structural damage had been caused by the moisture ingress. I accept Mr Frogley's submission that the questions of whether Mr and Mrs Warwick believed that the targeted repairs carried out by ROK Build prior to the sale were sufficient to address the problems identified in the Drybuild Report, and why they elected not to make the Drybuild Report available to purchasers (when the ROK Build letter and LeakScan reports were provided), should have been seen as central on the likely success or otherwise of the summary judgment application. Those questions were not sufficiently answered in the affidavits, and I think they had to be if the case was to be suitable for determination on a summary judgment application.
[26] Mr McCartney submitted that the plaintiffs only succeeded at summary judgment on a case that had not been pleaded. I do not accept that submission. As I noted in the judgment,13 the defendants did plead, in both their deceit and negligent misrepresentation causes of action, the following:
13 Little v Warwick, above n 1, at [90].
By providing the ROK Build letter and the LeakScan report to the first-named plaintiff, and by not providing a copy of the Drybuild Report obtained by them in November 2009, and by their silence in not disclosing at the time of sale of the property the extent of leaking problems with the house as known to them, the defendants misrepresented the true condition of the house, the extent of the targeted repairs done on the house and the real reason why the repair work had been done by and for them in their personal capacity prior to the sale of the property.
[27] In my judgment, I noted that some further amendments to the statement of claim might be necessary, but I expressed the view that it was clear enough from their pleadings that the plaintiffs did wish to rely on what I referred to as misrepresentation by silence (including by failure to disclose the Drybuild Report). I considered that it would not be appropriate to enter summary judgment on the basis of an arguably incomplete pleading, where the nature of the plaintiffs' case on the issue was sufficiently clear and any pleading deficiency could be cured by amendment.14
[28] While I did refer in the judgment to "misrepresentation by silence", I think it is perfectly clear that the plaintiffs were relying on more than mere silence. To take the negligent misstatement cause of action as an example, the heart of the plaintiffs' contention, as I understand it, was that the ROK Build letter and the LeakScan report, standing alone, created a misleading and false impression of the house, and the defendants carelessly allowed those two documents to be provided to purchasers without essential qualifications. It will be for the plaintiffs whether, and if so how, they elect to amend their pleadings, but whether or not they do so the pleading reproduced at [26] above was never one of "misrepresentation by silence" alone. The two documents that were provided are said to have shown the house in a better light than the circumstances justified, while the defendants allegedly overlooked a document which would have provided quite a different picture.
[29] I also accept the plaintiffs' submission that the argument over whether a building permit was or was not required for some or all of the remedial work was in the circumstances of this case unlikely to be suitable for determination on a summary judgment application, and that should have been apparent to the defendants as soon as
14 At [91].
they had the plaintiffs' expert evidence on the issue. I accept the plaintiffs' submission that a concession on that issue could have and should have been forthcoming earlier.
[30] Mr McCartney referred to Savill v NZI Finance Ltd,15 and Ladstone Holdings Ltd v Leonora Holdings Ltd,16 for the proposition that misrepresentation by silence requires a deliberate decision to withhold information for the purpose of creating a false impression. But the relevant part of the decision in Savill v NZI Finance Ltd referred to by Mr McCartney appears to have been concerned with a pre-contractual misrepresentation, and the effect of relevant provisions of the Contractual Remedies Act 1979. The statement that a representation that caused the representee to enter into the contract will only be actionable if the representor intended the statement to have that effect, must be read in that light. That is not the position here, where the very notion of a negligent misrepresentation admits of the possibility that the representation might have been careless, not deliberate. Nor does the passage in Ladstone Holdings Ltd referred to by Mr McCartney appear to assist. Potter J did state that "it follows that for there to be a misrepresentation by silence it would generally relate to deliberate non-disclosure of a fact known by the representor", but again that appears to have been in the context of a discussion relating to an alleged misrepresentation made by the vendor to the purchaser (the passage referred to by Mr McCartney follows immediately after a discussion about the effect of s 6 of the Contractual Remedies Act 1979, and a statement from the judgment of Hardie Boys J in Savill v NZI Finance Ltd).
[31] I cannot see that the authorities cited are helpful in circumstances where there was no contract between the parties, and the allegations are that the defendants made their statements either deceitfully or without the level of care the law is said to have required of them.
[32] I do not think it should avail the defendants that they may have mislaid the Drybuild Report, and that their advisers only became aware of it when it was drawn to their attention by the plaintiffs' solicitors. That was a matter wholly within the
15 Savill v NZI Finance Ltd, above n 9.
16 Ladstone Holdings Ltd v Leonora Holdings Ltd, above n 10.
control of the defendants, and their apparent failure to advert to the Drybuild Report earlier should not affect the plaintiffs' claim for costs.
[33] Mr Frogley referred to the judgment of Associate Judge Bell in Nand v Tower Insurance. In that case the Associate Judge said: 17
While it is the general practice to reserve costs on a plaintiff's unsuccessful summary judgment application, that is not necessarily the case with a defendant's summary judgment application. The court is reluctant to award costs against an unsuccessful plaintiff because of the difficulty in assessing the ultimate merits of the case at the summary judgment stage. In some cases, defences raised at the summary judgment may be shown later to have no foundation. In such cases it would be wrong to award the defendant costs on dismissing the summary judgment application. On the other hand, a defendant is usually able to assess the strength of its case before applying for summary judgment. The usual consequence of costs following the event may apply. That is the case here.
[34] Each case will no doubt depend on its facts, but in my view this is a case where the defendants either had or should have had the ability to assess the strength of their case on summary judgment, before they made their application. And even if the plaintiffs do need to amend their pleadings (a point on which I make no finding) I think it must always have been likely, once the contents of the Drybuild Report were available, that they would be given leave to amend as necessary. This was not a "last-minute proposed amendment" of the kind that persuaded the Court of Appeal in Thompson v Turner Hopkins that Mr Thompson, although successful with his appeal, should not have costs in that Court, and (as the Court noted in Thompson) "last minute amendments are always a possibility when the shortcut of a strike-out or summary judgment application is pursued by a party".18
[35] For those reasons, I conclude that the plaintiffs are entitled to costs on a 2B basis, without any percentage reduction as proposed by Mr McCartney in his alternative submission.
[36] I do accept Mr McCartney's submissions on two points, however. I do not consider that the case justifies an award of costs for second counsel. Costs for second counsel apply to the hearing itself, and in this case I think counsel who presented the
17 Nand v Tower Insurance [2016] NZHC 1455 at [49].
18 Thompson v Turner Hopkins, above n 4, at [74].
argument for the plaintiffs at the hearing was perfectly capable of running the hearing without the assistance of a junior.
[37] I also accept that the expert witness expenses claimed should be deferred for consideration after trial. The summary judgment application did not fail because one or other party clearly prevailed on the issues addressed in the expert evidence, and I think the overall justice of the situation will be sufficiently met if a costs award at this stage is limited to reflect only the defendants' failure on the issues concerned with the Drybuild Report (and my view that the case was never suitable for determination once those issues were appreciated). The work of the expert witnesses will be required for the trial in any event, and in my view the question of witness expenses for that work is better left for consideration after trial.
[38] The disbursements for the filing fee and the photocopying are appropriate, and should be paid to the plaintiffs.
Result
[39] The defendants are to pay costs to the plaintiffs in the sum of $7,359.00, plus disbursements of $185.00. The plaintiffs' claim for witnesses' expenses is reserved.
Associate Judge Smith
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