McGreevy v CRC Limited

[2019] NZHC 1143

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000770

[2019] NZHC 1143

BETWEEN

PATRICK JOHN McGREEVY

Appellant

AND

CRC LIMITED

Respondent

Hearing:

30 April 2019

Appearances:

A J Bailey for Appellant

W J Hamilton for Respondent

Judgment:

23 May 2019

JUDGMENT OF OSBORNE J

The appeal

[1]    Patrick McGreevy appeals against a decision of the District Court. That Court, in allowing Mr McGreevy’s appeal against a decision of the Tenancy Tribunal, awarded Mr McGreevy costs and disbursements. The Court applied the principle that costs should follow the event and the initial calculations should be on a 2B basis. None of that is in issue on this appeal.

[2]    In issue is the District Court’s decision to reduce a full 2B calculation ($3,687.50) by 40 per cent ($1,475), thereby awarding Mr McGreevy a sum of

$2,212.50 as costs.

The substantive background

[3]    Mr McGreevy had applied for orders under the Residential Tenancies Act 1986.

McGREEVY v CRC LIMITED [2019] NZHC 1143 [23 May 2019]

[4]    Mr McGreevy was at the relevant time subject to an Extended Supervision Order (ESO) under the Parole Act 2012. CRC provided to the Department of Corrections the accommodation and monitoring services in respect of Mr McGreevy (and others).

[5]    Following an initial hearing, the Tribunal raised an issue as to whether it had jurisdiction to hear the application. The particular issue related to whether the premises occupied by Mr McGreevy constituted “residential premises” as defined by s 2(1) of the Act.

[6]    The  parties  filed  further  submissions  on  the  question  of  jurisdiction.   Mr Hamilton, for CRC, relied on conclusions reached in a decision of this Court in Anderson v FM Custodians Limited.1 In Anderson the Court concluded that the term “residential premises” as used in both ss 2 and 65 of the Act refers to premises which may be lawfully used for residential purposes by any person.2 As the resource consent applying to the premises in question precluded their occupation other than by a facility manager, the premises were found not to be “residential premises” because they could not be used lawfully by “any person” (such as Mr and Mrs Anderson who were not managers).

[7]    The Adjudicator found that the Tribunal did not have jurisdiction. The reason for that conclusion was summarised:3

The premises where [the appellant] resides are not premises used or intended for occupation by any person as a place of residence. They are premises where offenders subject to ESOs reside after their release from prison and those offenders are subject to certain restrictions imposed, for example, by the High Court and/or the Parole Board.

(emphasis added)

[8]    In reaching that conclusion the original Adjudicator accepted the submissions for CRC. He rejected a point of distinction identified by Mr Bailey for Mr McGreevy. Mr Bailey had submitted that the position in Anderson was completely different to Mr McGreevy’s position. Mr Bailey had noted that in Anderson the law did not permit

1      Anderson v FM Custodians Limited [2013] NZHC 2423, (2013) 15 NZCPR 123.

2      Anderson, above n 1, at [70].

3 Tenancy Tribunal decision at [20].

“any person” to reside at the premises, whereas in Mr McGreevy’s case CRC could allow anyone to reside at the premises.

The District Court appeal

[9]Mr McGreevy appealed against the Tribunal decision.

[10]   By that time, this Court’s judgment in Parbhu v Want had been delivered.4 The judgment addressed the issues of interpretation which had arisen in Anderson. Cooke J disagreed with the interpretation adopted in Anderson.

[11]   In the light of Parbhu, CRC’s position on the jurisdiction issue changed. CRC advised the District Court that it would abide that Court’s decision on the jurisdiction issue and was content for the proceeding to be remitted back to the Tribunal, should the District Court deem that appropriate.

[12]   Counsel for the parties submitted a joint memorandum. They sought orders by consent allowing the appeal, quashing the Tribunal decision, and referring the matter back to the Tribunal for a hearing on remaining issues.

[13]   Judge MacAskill directed that the appeal proceed as a hearing. His Honour noted that the Court could not make consent orders as the Court itself needed to be satisfied that it was proper to allow the appeal on the jurisdictional point. Consequently, Mr Bailey was required to prepare full submissions.

[14]   Mr Hamilton also provided some submissions. Those included a summary of the Tribunal’s reasoning in reaching its decision on jurisdiction.

[15]   In allowing the appeal, Judge MacAskill adopted Mr Hamilton’s summary of the Tribunal’s reasoning.5 His Honour then concluded that the Tribunal’s finding that the premises occupied by Mr McGreevy could not be occupied by “any person” (purporting to apply Anderson) was incorrect. It is to be observed that the fundamental

4      Parbhu v Want [2018] NZHC 2079.

5      McGreevy v CRC Limited [2018] NZDC 20953 at [7].

flaw in the Tribunal’s reasoning was in viewing the issue and outcome in Anderson as applicable to Mr McGreevy’s situation.

The District Court costs judgment

[16]   Judge MacAskill proceeded to determine costs as part of his Honour’s appeal judgment.

[17]His Honour stated:

[11]      As to the question of costs, Mr Bailey’s primary submission is that the appeal has been successful and costs should follow the event. Mr Hamilton responded that the Court may properly take into account that:

(a)The respondent has acted responsibly by not contesting the appeal, as soon as the judgment in Parbhu became available.

(b)The respondent did not seek costs against the appellant before the Tenancy Tribunal, where it succeeded.

[12]      Mr Hamilton acknowledged that if the respondent had obtained an order for costs from the Tribunal, that order would have been reversed on the determination of this appeal.

[13]Mr Bailey has filed a memorandum quantifying the costs sought at

$3,687.50 and he points out that the respondent had earlier agreed that the proceedings were Category 2 proceedings.

[14]      I do not think it necessary that the Court recite all the relevant principles relating to questions of costs in this context. I consider that the appropriate starting point is that the appellant recover costs on a 2B basis in the sum of $3,687.50, together with any disbursements as fixed by the Registrar. I am persuaded that the grounds relied on by Mr Hamilton justify a reduction of 40% of the costs so calculated, which reduces the award to

$2,212.50.

Submissions

Submissions for the appellant

[18]   Mr Bailey referred to authorities concerning the approach to costs where a party has abided the outcome. He invited the Court to view, as the most definitive judgment, that of the Court of Appeal in Hong v Deliu.6 Mr Bailey referred in particular to this passage in the judgment:

6      Hong v Deliu [2016] NZCA 75, (2016) 23 PRNZ 156, at [23].

… a defendant joined in a proceeding has, essentially, three  options:

(1) to defend, (2) to abide (either conditionally or unconditionally) or

(3) to admit the cause of action. These have different costs consequences. Costs incurred (and recoverable) by the plaintiff will be greater in the former case than the latter two. A defendant who abides still puts the plaintiff to the cost of a trial, albeit a less strenuous one. A defendant who admits averts that cost for the plaintiff judgment in such a case may be entered by formal proof. Where either the second or third option has been taken, the course is out of the ordinary. Even though the level of costs will be less than in the first instance, a Court will still need to consider, however briefly, whether it is just that the usual scale measure of costs should be visited on that defendant.

[19]   Mr Bailey relied also upon passages in two judgments of this Court which were approved by the Court of Appeal in Hong v Deliu. In Kawerau Jet Services Holdings Ltd v Queenstown Lakes District Council, French J observed that she disagreed with any suggestion that a person who abides the decision of the Court can never be liable for costs, she stated that the task of the Court is to make an assessment of overall justice as between the particular parties.7 In Wang v North Shore District Court (No 3), Woolford J, upon a review of authorities, observed:8

The inference from [these] cases … is that where the defendant abides the Court’s decision and does not adopt an unreasonable position, they will not necessarily be required to be at the full costs of court proceedings.

[20]   First, Mr Bailey, by reference to a detailed analysis of the Anderson and Parbhu decisions and to current moves towards reform of the Residential Tenancies Act, explained why the interpretation issues considered in Anderson and Parbhu were all along irrelevant to Mr McGreevy’s case.

[21]   Secondly, Mr Bailey submitted that the absence of an application for any award of costs in the Tribunal was irrelevant to the appropriate costs award on the District Court appeal. Mr Bailey noted that:

(a)the Tribunal does not have an established practice in favour of costs awards;

7      Kawerau Jet Services Holdings Ltd v Queenstown Lakes District Council, HC Invercargill CIV- 2008-425-518, 19 May 2009.

8      Wang v North Shore District Council [2015] NZHC 1611, [2015] NZAR 1678, at [26].

(b)it is unlikely that a costs award would have been made in the Tribunal in this case, even if sought (particularly having regard to a history of tenancy agreements being entered into between Mr McGreevy and CRC); and

(c)it may be inferred that CRC had made a tactical decision to not apply for costs (rather than a decision made out of any sense of generosity towards Mr McGreevy).

[22]   Mr Bailey noted that in Mr Hamilton’s synopsis reliance was placed on a passage in the judgment of the Supreme Court in Manukau Golf Club Inc v Shoye Venture Limited.9

[23]   Prior to that case, the Court of Appeal in allowing an appeal against a High Court judgment, had refused the appellant its costs without explaining why it was not following the principle that the party who fails with respect to an appeal should pay costs for the party who succeeds. In its judgment, allowing the appeal, the Supreme Court observed that for the purposes of costs in the appellate court, it does not matter why the judge below went wrong, and that the losing party on the appeal almost always has to pay costs to the winning party. The Supreme Court observed:10

If the respondents accepts the judge below was wrong, then it should settle with the appellant or not seek to defend the appeal. In those circumstances, it would avoid liability for costs. Shoye did not adopt that stance in the Court of Appeal. We have seen its submissions. It sought to uphold what the Judge had found in its favour.

[24]   Mr Bailey submitted that the reference to the avoidance of “liability for costs” cannot be taken to mean the avoidance of any liability at all. A more appropriate interpretation of the Court’s observation may be that the Court was referring to the liability in terms of the primary principle that costs follow the event. In Mr Bailey’s submission, such an interpretation is consistent with the Court of Appeal’s subsequent, and more detailed, explanation in Hong v Deliu.

9      Manukau Golf Club Inc v Shoye Venture Limited [2012] NZSC 109, [2013] 1 NZLR 305.

10 At [13].

Submissions for the respondent

[25]   For CRC, Mr Hamilton identified as the first principle relevant on this appeal the proposition that costs should be reduced to reflect the fact that a respondent has not opposed an appeal. He referred to the Supreme Court’s decision in Shoye, and in particular the passage set out at [23] above.

[26]Secondly, Mr Hamilton identified the discussion of the Court of Appeal in

Hong v Deliu as set out at [18] above.11

[27]   Thirdly, Mr Hamilton submitted that the first focus in this case (having regard to the Court of Appeal’s observation in Hong v Deliu) must be on whether CRC made an “error”. If so the Court then examines the extent of the error and the reasonableness of the respondent’s conduct thereafter.

[28]   Turning to this case, Mr Hamilton referred to the fact that it was the Tribunal that had invited submissions on jurisdiction – in response, CRC had relied on High Court authority in force at the time which CRC considered consistent with the circumstances in Mr McGreevy’s case. Mr Hamilton further noted that, in the context of the appeal to the District Court, it was CRC which had brought the Parbhu decision to the attention of the Court and had then taken steps to not oppose the appeal or otherwise put Mr McGreevy to cost. He noted that CRC had done everything to minimise costs including providing its consent to proposed orders.

[29]   Mr Hamilton further noted that in other cases where costs have been discounted to reflect a respondent’s abiding the outcome, the reduction has been greater than the 40 per cent reduction applied in this case.

[30]   Finally, Mr Hamilton in his written synopsis invoked the provisions of r 14.2(f) of the High Court Rules which preclude an award of costs which exceeds the costs incurred. At the hearing, Mr Hamilton withdrew reliance of this point after Mr Bailey advised the Court that the fee he charged on McGreevy will be no less than any sum awarded by way of costs.

11     Hong v Deliu, above n 6.

Appeal on costs – the applicable principles

[31]   The Court of Appeal in Tower Insurance Ltd v Kilduff restated the correct approach on an appeal relating to an award of costs:12

[18]      An award of costs involves the exercise of judicial discretion. As such, in order to succeed, Tower must show that the High Court acted on a wrong principle, failed to take into account a relevant matter or took into account an irrelevant matter, or was plainly wrong. However, the costs adjudication does not involve an unfettered discretion, and it must be exercised on a principled basis.

[19]      A trial judge has a particular advantage when fixing costs, and so the Judge’s views can be influential on appeal. Appellate courts will be particularly slow to interfere with a lower court’s decision on costs, because that court, in exercising its discretion, will be influenced by a myriad of details that are difficult to replicate on appeal.

(footnotes omitted).

Costs determination – the applicable principles

[32]The overarching principles are well-summarised in McGechan on Procedure:13

(1)   Principles

The principles governing the exercise of the general discretion given by r 14.1 are now well established.

(a)At least since the introduction of the detailed costs regimes in 2000, the discretion has not been unfettered. It is qualified by the specific costs rules rr 14.2-14.10, and is exercisable only in situations not contemplated by those specific rules, or which are not fairly recognised by them.

(b)The costs regime is of a regulatory character and it is important that its integrity be maintained.

(c)There is accordingly a strong implication that the Court is to apply the regime in the absence of some reason to the contrary.

(d)Any departure must be a considered and particularised exercise of the discretion.

(e)Although the Court does not need to give reasons for a cost order that applies the regime, reasons (albeit brief) must be given for any departure.

[33]   The cases from which the authors of McGechan derive those principles include the Supreme Court judgment in Shoye.

12     Tower Insurance Ltd v Kilduff [2019] NZCA 82 at [18].

13     McGechan on Procedure, (online loose leaf ed, Thomson Reuters) at [HR 14.1.02(1)].

[34]   Where matters are claimed to justify an award of costs either increased or reduced from scale, the Court should consider its discretion in terms of the relevant, specific rules (rr 14.6 and 14.7 respectively) and should not resort to the general discretion under r 14.1.14

[35]   I conclude from consideration of the judgments in Shoye and Hong v Deliu (and other authorities referred to in the latter decision) that the Court, when considering the possible reduction of costs where a defendant or respondent has abided the outcome, will correctly approach the matter in this way:

(a)The Court first, under r 14.3, identifies (if not already identified) categorisation of the proceeding (1, 2 or 3);

(b)A defendants’ or respondents’ abiding of the outcome may then impact on the assessment of costs in one or both of two ways:

(i)Under r 14.5, the appropriate time allocation for each step (Band A, B or C) (under Schedule 3 of the District Court Rules and High Court Rules), especially in relation to preparation of written submissions and appearance, may be set to reflect a less than normal amount of time; and/or

(ii)Under r 14.7(f), it may be appropriate – in recognition of the responsible approach of the defendant/respondent based on broader policy considerations, (whether or not there has been a significant saving of time) – to reduce an otherwise appropriate award.

14     New Zealand Carbon Farming Limited v Mighty River Power Ltd [2016] NZCA 624, (2016) 23 PRNZ 789, at [35]–[37].

District Court’s application of principles

Consideration 1 – the Anderson / Parbhu decisions

[36]   I accept Mr Bailey’s submission that the Anderson and Parbhu decisions should have been viewed as irrelevant to the costs outcome. They were in relation to the issues before the Tribunal, as Mr Bailey submitted, a “red herring”. Responsibly, Mr Hamilton did not in his submissions critique the detailed reasoning by which Mr Bailey demonstrated the irrelevance of the Anderson / Parbhu authorities.

[37]   I am satisfied that the Judge was incorrect to accept the submission for CRC that costs should be reduced on account of the Parbhu decision having an impact on CRC’s decision-making in the litigation. Neither the Anderson nor the Parbhu decisions should have played a role in any of the findings on jurisdiction.

Consideration 2 – responsibly abiding the decision

[38]   On the authorities, it was both appropriate and necessary that Judge MacAskill consider in the exercise of the costs discretion the fact that CRC had abided the decision.

Consideration 3 – CRC’s not seeking costs in the Tribunal

[39]   In the context of this case, the decision of CRC not to seek costs in the Tribunal should not have carried any weight in the determination of costs. Litigants in both the District Court and this Court are taken to know that the primary rule in relation to proceedings before such courts is that costs follow the event. For the reasons identified by Mr Bailey, the position is different in the Tribunal. Furthermore, the District Court had no evidence as to the particular reasons that CRC had decided not to seek costs in the Tribunal. As Mr Bailey submitted, CRC’s decision may have been tactical rather than altruistic.

[40]   Mr Hamilton referred me to paragraph [12] in the District Court judgment (above at [17]). Mr Hamilton suggested that the reference as to the inevitable reversal of any costs order in the Tribunal, in the event of a successful appeal, suggested the Judge had not taken CRC’s non-pursuit of costs into account. But that does not follow.

What the Judge recorded was that he in fact was persuaded by the grounds relied on by Mr Hamilton.

[41]   In the circumstances of this case I find that the District Court erred in attaching weight to this factor.

Level of reduction from a 2B award

[42]   Judge MacAskill, having identified the above considerations, found that they cumulatively justified a reduction of 40 percent from a 2B award of costs. As that reduction was a global reduction based on the Judge’s reference to what I found to be irrelevant or incorrect considerations, it is necessary for this Court on appeal to perform its own assessment.

Consideration of the discretion

Costs to follow the event

[43]   CRC, responsibly, has not suggested that costs ought not to have followed the event. This was plainly a case in which it was correct to apply the primary principle under r 14.2(1)(a).

Approach to scale award

[44]   Mr Hamilton’s written submissions included the following observations which have relevance to time allocations under Schedule 4. Mr Hamilton observed:

(a)The submissions filed [for Mr McGreevy] in support of the appeal … totalled only four substantive pages (plus two lines on a fifth page); and

(b)The appellant has confirmed that the position adopted by the respondent reduced the hearing time.

[45]   If the assessment of a costs award (after categorisation under r 14.3) is next approached (as it must be) by correctly determining the appropriate time, the second consideration identified by Mr Hamilton (the reduction of hearing time through the concession) is neutral. On the Judge’s calculation of scale, Mr McGreevy recovered only for the actual hearing time.

[46]   That leaves the allocation for preparation of written submissions under item 24A of Schedule 4 District Court Rules 2014. The equivalent item in the High Court Rules is item 56, schedule 3. On the 2B calculation initially adopted in the District Court, the “B” determination meant there was an allowance of 1.5 days. Had the allocation been on a 2A basis, the allocation would have been 0.5 days.

[47]   I am not satisfied, in the circumstances of the appeal to the District Court, even with CRC abiding the outcome, that a comparatively small amount of time was reasonable for the preparation of Mr McGreevy’s submissions. The issue of jurisdiction, once raised by the Tribunal had been keenly embraced by CRC. CRC had managed to persuade the Tribunal that Anderson was applicable. Once the District Court indicated that the appeal could not be allowed by consent, Mr McGreevy was entitled to have his counsel ensure that there was full engagement with the jurisdictional issue to ensure that the Anderson decision was not once again applied incorrectly. The emergence of the Parbhu decision was clearly helpful in that regard but, as simply the conflicting decision of a different High Court Judge, its conclusion would not bind the District Court. The very success achieved by CRC in the Tribunal (incorrectly as a matter of law) led to the situation in which a time allocation based on Band B was appropriate.

[48]   On this basis the time allocations and 2B calculation adopted in the District Court ($3,687.50) represented an appropriate calculation before consideration of any reduction under r 14.7.

Reduction for “some other reason” under r 14.7(g)?

[49]   Although I am satisfied that the calculation of scale costs was appropriately completed on a 2B basis, I am equally satisfied that CRC’s abiding of the outcome justified the reduction of costs notwithstanding the principle that the determination of costs should be predictable and expeditious. The authorities to which counsel referred me establish in a settled way the fact that a party’s cooperation in abiding the outcome is a matter to be considered in the exercise of the costs discretion. Both parties are able, through advice, to predict the likelihood of some reduction.

[50]   That said, in this case there was no justification for a substantial reduction at the level of 40 per cent. This was an appeal from a statutory tribunal on a matter of statutory jurisdiction. The situation was far removed from the trial situation such as existed in Hong v Deliu where the difference between a fully contested hearing and a formal proof will usually be very significant. Here the appeal hearing was never going to be lengthy, but the appellant was always to be left with the burden of satisfying the District Court that the legal arguments which had prevailed in the Tribunal were incorrect. Any saving of time was marginal.

[51]   Nevertheless, as a matter of policy, the approach adopted on appeal by CRC is to be encouraged and, consistently with authority, to be taken into account in the exercise of the costs discretion. As CRC’s abiding was communicated only after the appeal had been filed, and does not affect the calculation of hearing time, a 15 per cent adjustment of the costs order would have been appropriate on account of CRC’s abiding.

Outcome

[52]   The appellant has demonstrated that the District Court erred in its application of the District Court Rules when reducing the costs award which would otherwise have been made in Mr McGreevy’s favour. The costs award needs to be set aside and replaced by an award which is made in accordance with the principles governing the costs discretion. The award in the District Court in relation to disbursements does not require alteration.

[53]   I am satisfied that the just award of costs would have been $3,134.38 (representing a 15 per cent reduction from $3,687.50).

[54]   I heard submissions from counsel as to the appropriate costs sought in relation to the appeal.

[55]   The appropriate calculation of costs on this appeal (on a 2A basis) is $3,902.50 The appellant is also entitled to his disbursements on the filing and sealing fees.

Orders

[56]I order:

(a)The decision of the District Court dated 11 October 2018 to award costs of $2,212.50 to the appellant is set aside.

(b)The respondent is instead ordered to pay the appellant the costs of the District Court appeal proceeding fixed in the sum of $3,134.38.

(c)The award of disbursements in the District Court is unaltered.

(d)The respondent is to pay to the appellant the costs of this appeal, fixed in the sum of $3,902.50 with disbursements in the sum of $580.00.

Osborne J

Solicitors:

Chapman Tripp, Christchurch
A J Bailey, Barrister, Christchurch