McKechnie Aluminium Solutions Limited v Macaulay Metals Limited

[2024] NZHC 809

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2022-443-42

[2024] NZHC 809

BETWEEN

MCKECHNIE ALUMINIUM SOLUTIONS LIMITED
First Plaintiff

VERO INSURANCE NEW ZEALAND LIMITED
Second Plaintiff

AND

MACAULAY METALS LIMITED

Defendant

Hearing:	On the papers
Appearances:	A J Sherlock and S E M Corban for the Plaintiffs P Hunt and T Clark for the Defendant
Judgment:	15 April 2024

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[Costs]

[1]    In my judgment dated 28 February 2024 I dismissed the plaintiffs’ application for leave to apply for summary judgment against the defendant on liability.1 I also found that, even if leave had been granted, the plaintiffs’ application for summary judgment would not have been successful.2

[2]    I expressed the preliminary view that costs should be reserved. However, if any party disagreed with that view, then brief memoranda could be filed and costs would be determined on the papers. The defendant filed a memorandum dated

1      McKechnie Aluminium Solutions Ltd v Macaulay Metals Ltd [2024] NZHC 358 at [89].

2 At [88].

MCKECHNIE ALUMINIUM SOLUTIONS LIMITED v MACAULAY METALS LIMITED [2024] NZHC 809

[15 April 2024]

19 March 2024 seeking an award of costs on a 2C basis, in respect of the filing of the notice of opposition and affidavits in opposition and preparation of written submissions for the hearing, and a 2B basis for the appearance at the hearing. The total amount of costs and disbursements claimed is $14,340.

[3]    The plaintiff filed a memorandum dated 22 March 2024 opposing costs and agreeing with my preliminary view that costs should be reserved.

[4]Should costs be awarded against the plaintiffs?

Legal principles – unsuccessful applications for summary judgment

[5]    Costs are ultimately a matter of the Court’s discretion, the overall objective being to achieve an outcome that best meets the interest of justice.3 That discretion is qualified by the applicable costs rules, contained in pt 14 of the High Court Rules 2016 (HCR).

[6]    Costs on an opposed interlocutory application must be fixed when the application is determined unless there are special reasons to the contrary.4 However, this rule does not apply to applications for summary judgment.5 Where a plaintiff is unsuccessful on a summary judgment application the usual position is that costs are reserved until determination of the substantive claim.6 In NZI Bank Ltd v Philpott, the Court of Appeal confirmed the reason for the different approach to costs where a plaintiff fails in an application for summary judgment:7

As with most questions of costs, they should be approached on broad principles. Whilst a defendant may be regarded as successful in one sense in resisting an application for summary judgment, it is of course not a final determination in the proceeding itself. If, ultimately, the plaintiff does succeed it seems to us in the general run of cases that the defendant should pay for both proceedings, the Court paying particular attention to the reasons why the plaintiff was unsuccessful in the first case. If those reasons include some question of fault on the part of the plaintiff then it may be appropriate to reduce

3      High Court Rules 2016 [HCR], r 14.1; Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7] and [16]; Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [21]–[24] and [28]; and Mansfield  Drycleaners  Ltd  v  Quinny’s  Drycleaning (Dentice Drycleaning Upper Hutt) Ltd (2002) 16 PRNZ 662 (CA) at [27].

4      HCR, r 14.8(1).

5      HCR, r 14.8(3).

6      NZI Bank Ltd v Philpott [1990] 2 NZLR 403.

7      At 405-406; see also Mulholland v Mulholland [2023] NZHC 3853 at [21]-[22].

or even eliminate an entitlement to costs for that part of the proceedings so far as the plaintiff is concerned. But where the defendant has raised defences which cannot by their nature be resolved at a summary judgment application but ultimately turn out to have no basis, then costs on both sets of proceedings belong to the plaintiff.

…

Having regard to the difficulty in determining those matters until the case itself is concluded, in many cases the best course will be for the Judge or Master to reserve the question of costs until the litigation is determined. In some cases (and this may be one) the impecuniosity of the defendants may mean the plaintiff will not proceed to the more expensive contested hearing having failed at the summary judgment level. That does not mean that a defendant who feels he is entitled to costs is prevented from bringing the matter before the Court and having the question argued and obtaining an order if necessary. We repeat, however, that the incidence of costs is best settled when the result of the litigation is known. Hence the widespread practice as we see it of reserving costs in such situations. The Master may well indicate for the trial Judge the extent and duration of the argument on the application.

[7]    This position applies by analogy to unsuccessful applications for leave to apply for summary judgment where the application is similar to an application for summary judgment in that the application fails because of an assessment on the merits that the plaintiff’s case cannot be determined summarily.8

[8]    Costs may, however, be awarded against an unsuccessful plaintiff in exceptional cases involving abuse of the procedure, where the plaintiff’s application has been commenced erroneously, unreasonably, by way of an experiment, or with certain knowledge of failure.9 These exceptions to the usual rule regarding costs on unsuccessful applications for summary judgment also apply by analogy to unsuccessful applications for leave.10

Assessment

[9]    In this case the application for leave to apply for summary judgment was unsuccessful because I found that the conflicts of factual and expert evidence are too extensive and the issues too complex for the plaintiffs’ claim for negligence to properly

8      Mulholland v Mulholland, above n 7, at [18]–[20].

9      NZI Bank Ltd v Philpott [2019] 2 NZLR 403 at 405-407. Emmons Developments NZ Ltd v Mitsui Sumitomo Insurance Co Ltd [2016] NZHC 1244 at [12]–[13], Mason v Dodd [2020] NZHC 2005 at [10] and Strinagar Ltd v Horowhenua District Council [2022] NZHC 1094 at [10]; Mulholland v Mulholland, above n 7, at [18]–[20].

10 Mulholland v Mulholland, above n 7, at [20].

be determined summarily. Therefore, the usual position regarding costs on unsuccessful applications for summary judgment may apply by analogy to the plaintiffs’ application for leave, that is, costs are reserved.

[10]   However, the defendant submits that costs should be awarded against the plaintiff at this stage. The defendant says that the rationale for an immediate award of costs on an unsuccessful application for leave such as this is to incentivise parties to carefully and objectively assess the merits of such applications before bringing them.11

[11]   The defendant submits that it should have been clear to the plaintiffs from the outset that the proceeding was not suitable for summary determination, such that the application should never have been made. Specifically, the defendants submit that:

(a)It was clear from the pleadings that there were genuine material disputes of fact as to the cause of the fire, and the plaintiffs unreasonably failed to appreciate that the interpretation of the video footage they relied on was disputed and required interpretation.

(b)The plaintiffs unreasonably failed to acknowledge that the defendant had an arguable defence to the claim even after the defendant had provided comprehensive affidavit evidence in support of its opposition to the application.

(c)It is clear from the volume of the expert evidence filed by the parties that there was a genuine contest between the experts as to the cause of the fire, such that there was considerable scope for argument. The authorities are clear that it is not appropriate to resolve genuinely contested expert evidence in the context of a summary judgment application.12

11     Mason v Dodd [2020] NZHC 2005 at [10].

12     MacLean v Stewart (1997) 11 PRNZ 66 at 68-69.

(d)The plaintiffs refusal to accept the defendant’s invitation to withdraw their application for summary judgment was unreasonable.

[12]   After a one-day hearing and detailed review of the affidavit evidence and submissions put forward by the parties, I ultimately found that the disputes of fact and conflicts of expert evidence in this case are such that the plaintiffs’ claim for negligence cannot properly be determined summarily.

[13]   There were considerable difficulties for the plaintiffs in embarking on and pursuing summary determination of liability for their claims. However, this case can be distinguished from a case like Mason v Dodd,13 where costs were awarded against the plaintiff after the Court found that the plaintiff’s claim for negligence was unsuitable for summary determination by a very wide margin. In that case, the plaintiffs failed to provide any expert evidence on the relevant standard of care, and it was not clear whether the plaintiff had suffered any loss, and there was a strong argument that causes of action were statute barred. In the present case, the plaintiffs sought leave to apply for summary judgment on liability only. There are no limitation issues. Whether the plaintiffs have suffered loss was not in issue at least for the purposes of summary judgment. The plaintiffs provided credible expert evidence on the standard of care expected of a prudent contractor undertaking hot work and on breach by the defendant of its duty of care, and on the causation issues. The plaintiffs put forward video footage evidence of the relevant events which they and their experts believed established causation.

[14]    I accept the submission of Mr Sherlock, for the plaintiffs, that the plaintiffs and their experts genuinely and reasonably held the belief that there was no arguable defence to the plaintiffs’ claim, and that the arguments put forward by the defendant based on the evidence of its fact and expert witnesses were either false, hypothetical or frivolous.14 I do not consider that the plaintiffs pursued the application erroneously or in the certain knowledge of failure, or by way of an experiment.

13     Mason v Dodd [2020] NZHC 2005 at [10].

14     MacLean v Stewart (1997) 11 PRNZ 66 at 69, lines 11-14.

[15]   The defendant wrote to the plaintiffs on 10 October 2023 noting that the application for summary judgment was “unmeritorious and misconceived”, and proposing that the defendant would agree to the plaintiffs’ alternative application for a separate liability trial provided that the plaintiffs withdrew their application for summary judgment. However, this letter was sent prior to the defendant serving its notice of opposition and affidavits, and before the plaintiffs could assess the substance and credibility of the defendant’s position. Further, it is not clear that this letter was truly an offer to dispose of the plaintiffs’ application for summary judgment as opposed to simply being a letter intended to inform the plaintiffs that their application was “hopeless” and should be withdrawn.15 The defendant ultimately agreed to the plaintiffs’ alternative proposal of a separate liability trial in any event. In the circumstances, I do not consider that it was unreasonable for the plaintiffs to continue with their application following receipt of this letter such that there should be a departure from the usual position that costs on an unsuccessful application for summary judgment are reserved.

[16]   Overall, while this case may be close to a borderline case, I do not consider that it can properly be categorised as an exceptional case involving abuse of the summary judgment procedure and therefore abuse of the process of the Court.

[17]Therefore, I confirm my preliminary view that costs should be reserved.

Result

[18]   Costs on the plaintiffs’ application for leave to bring a summary judgment application are reserved.

Associate Judge Skelton

Solicitors:

Hesketh Henry, Auckland for Plaintiffs McElroys, Auckland for Defendant

15     Nandro Homes Ltd v Datt HC Auckland CIV-2008-4040-6676, 13 July 2009 at [13].