Middeldorp v Avondale Jockey Club Inc
[2021] NZCA 238
•9 June 2021 at 10 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA459/2020 [2021] NZCA 238 |
| BETWEEN | VINCENT JACOB MIDDELDORP |
| AND | AVONDALE JOCKEY CLUB INCORPORATED |
| Hearing: | 25 February 2021 |
Court: | Cooper, Mallon and Wylie JJ |
Counsel: | P W David QC and C D Boswell for Appellant |
Judgment: | 9 June 2021 at 10 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe respondents are entitled to one set of costs in this Court for a standard appeal on a band A basis plus any disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Mallon J)
Introduction
This is a costs appeal. It arises in the context of a judicial review in which Vincent Middeldorp challenged three distinct decisions of the Avondale Jockey Club Inc (the Club). Ultimately, he succeeded in his challenge on one of these decisions and obtained declaratory relief. He failed on his challenges to the other two decisions.
The key issue on this appeal is whether he is the successful party for the purposes of r 14.2(1)(a) of the High Court Rules 2016. Mr Middeldorp says that he is and that the High Court erred in finding otherwise. The Club submits that it was open to the High Court Judge to hold that it was the successful party overall. It also says that the general principle that whoever receives relief is the successful party is not necessarily apt for judicial review proceedings and, in any event, is not an inflexible rule and is subject to the Court’s discretion on all matters relating to costs.[1]
[1]High Court Rules 2016, r 14.1.
In considering this appeal, we repeat what this Court recently said:[2]
[1] Questions of costs are ultimately a matter of discretion. The exercise often requires assessment of a wide range of factors. The overall objective is to achieve an outcome that best meets the interests of justice in the given case in accordance with any applicable costs rules and consistent with established principles. The trial judge is uniquely placed to make this assessment. It is well-settled that an appellate court should not interfere with a costs award unless satisfied that the judge acted on a wrong principle, failed to take account of some relevant matter, factored in the irrelevant or was plainly wrong. This is why appeals against costs awards seldom succeed.
The proceeding
Factual background
[2]Kinney v Pardington [2021] NZCA 174 (footnotes omitted).
Mr Middeldorp has been a member of the Club for nearly 40 years. He was elected to the Club’s Committee and served on that Committee from 2013. The judicial review proceeding had its genesis in decisions made by the Club to address its long‑standing serious financial issues. This included a decision to close the Club’s horse training facilities, which had been available to both professional and hobby trainers for over 70 years.
Mr Middeldorp was strongly opposed to the decision to close the training facilities and other decisions made by a majority of the Committee members. He took steps to undermine those decisions, which the Club viewed as trouble-making. Mr Middeldorp on the other hand considered he was acting in the best interests of the Club. Mr Middeldorp’s actions led to his suspension from the Committee on two occasions.
It was during the first of those suspensions that the decision to close the training facility was made (unanimously by the remaining Committee members). In between the first and second suspension decisions, the Committee received 14 applications for memberships from applicants whom the Committee suspected were for the purpose of supporting Mr Middeldorp’s threat to petition a Special General Meeting to challenge the Committee’s decision to close the training facilities. It wrote to those applicants inviting them to provide their reasons for wanting to join the Club. Thirteen of the applicants did not reply and the Committee then rejected their applications. The fourteenth applicant did reply and expressed a commitment to the Club. However, the Committee rejected his application on the basis that the applicant’s brother had an outstanding debt with the Club and the applicant’s horse racing involvement was associated with his brother.
Subsequent to the second suspension decision, Mr Middeldorp filed his proceeding in the High Court. It challenged the following matters relating to the governance of the Club:
(a)the lawfulness of the Committee’s decisions on 28 November 2016 and 7 December 2017 to suspend him from office as a Committee member for the periods stated in those decisions (the suspension decisions);[3]
(b)the Committee’s decisions in July and September 2017 declining 14 applications for membership of the Club (the application decisions); and
(c)from 29 October 2014 until the present, the Committee had operated without 10 Committee members and did not follow the retirement and re-election rules of the Club (the Committee operational and election requirements).
The High Court
[3]The 28 November 2016 decision suspended Mr Middeldorp for three months and required a written apology. The 7 December 2017 decision suspended him for four consecutive meetings.
The proceedings were heard by Gordon J in the High Court. She gave judgment in favour of the Club.[4] In doing so, contrary to a submission for the Club, she found that the Club was amenable to review.[5] As to the three matters challenged:
[4]Middeldorp v Avondale Jockey Club Inc [2019] NZHC 901 [HC substantive decision].
[5]At [54]–[55].
(a)On the suspension decisions:
(i)she found in favour of Mr Middeldorp on his first cause of action (namely, that the Committee did not have the power under the Club’s Rules to suspend an elected Committee member);[6]
[6]At [73].
(ii)she found against Mr Middeldorp on his second cause of action (breach of natural justice)[7] and third cause of action (unreasonableness or error of law in the absence of any evidence to support the decision);[8] and
[7]At [128].
[8]At [138].
(iii)she declined to give relief on the first cause of action for reasons including that Mr Middeldorp was not seriously prejudiced by the suspension decisions, there was no practical utility as the suspensions had been served, and there was no future utility because the Club was in the process of developing a new constitution.[9]
[9]At [201].
(b)On the application decisions:
(i)Mr Middeldorp’s cause of action was that the Committee had failed to act in good faith and with a proper purpose when considering the applications under the Rules; and
(ii)the Judge found against Mr Middeldorp because of the evidence which showed that the Committee had an open mind about admitting new members who genuinely intended to be ongoing members and because the unpaid debt was a proper basis on which to decline membership to the fourteenth applicant.[10]
(c)On the operational and election requirements, the Judge:
(i)determined that the Rules required the Committee to have 10 members and accepted that the Committee was operating with fewer than 10 members because it had not been possible to fill the positions;[11]
(ii)accepted that this meant the process in the Rules for retirement and re-election could not be followed and the Club had adopted a pragmatic approach as a result;[12]
(iii)found that it was lawful for the Committee to operate with fewer than 10 members and to adopt the retirement and re-election process it did on the basis of implied terms that were necessary to enable the Club to function administratively; and[13]
(iv)therefore found against Mr Middeldorp on this cause of action.[14]
The Court of Appeal
[10]At [166]–[167] and [173].
[11]At [189].
[12]At [187(a)].
[13]At [188]–[191].
[14]At [192].
Mr Middeldorp appealed. This Court allowed the appeal in part.[15] It agreed with Mr Middeldorp that the High Court was wrong to decline relief on the first cause of action. It said a declaration would serve an important purpose: vindicating Mr Middeldorp, others adversely affected by his suspension (that is, members who had voted for him and who were entitled to have him present and participating in meetings), and the rule of law more generally.[16]
[15]Middeldorp v Avondale Jockey Club Inc [2020] NZCA 13 [CA substantive decision].
[16]At [44].
Mr Middeldorp’s pleading sought a declaration that the 28 November 2016 and 7 December 2017 decisions were made illegally and without jurisdiction and were void and of no effect. This Court considered the declaration should be confined to recording that the suspensions were unauthorised and unlawful. It noted that a finding that a decision is unlawful does not automatically mean that the decision was void and Mr Middeldorp did not seek to argue that decisions made by the Committee during the two periods of suspension were unlawful or of no effect.[17] It was therefore not appropriate to declare the decisions void and of no effect.
[17]At [49].
Mr Middeldorp’s appeal on the application decisions was dismissed. In doing so, this Court considered the issue relating to the fourteenth applicant to have been finely balanced because that applicant had confirmed his interest in ongoing membership.[18]
[18]At [66].
Mr Middeldorp’s appeal on the Committee’s operational and election requirements was also dismissed. In contrast with the High Court, the Court found that the Committee was permitted to operate with fewer than 10 members.[19] In common with the High Court it considered that the Club was not permitted to adopt the retirement and re-election process that it had.[20] It declined to award relief on that process because the Rules were unworkable, there had been no complaints by anyone who had missed out on election, there was no other prejudice identified, and the Club had now adopted a new constitution.[21]
Outcome
[19]At [82].
[20]At [83].
[21]At [86].
The outcome after the appeal was that:
(a)Mr Middeldorp had succeeded on his challenge to the suspension decisions, pursuant to one of his three causes of action, and had obtained relief partly in the terms in which it had been sought;
(b)Mr Middeldorp had failed on his challenge to the application decisions (one cause of action); and
(c)Mr Middeldorp had failed to establish that the Committee acted in breach of its Rules by operating without 10 members, succeeded in establishing that the Committee had not followed its rules in its retirement and re‑election processes, but was declined any relief (one cause of action).
The costs decisions
High Court decision No 1
Prior to the Court of Appeal decision, the High Court Judge’s view was that “[o]verall, the Club was the successful party”.[22] This was because, although Mr Middeldorp succeeded on some arguments (the Club’s amenability to review and the absence of a power to suspend him), he was unsuccessful in obtaining any relief. She therefore considered that the Club was entitled to an award of costs on a 2B basis.
[22]Middeldorp v Avondale Jockey Club Inc [2019] NZHC 1447 at [20] [First HC costs decision].
The Judge then considered whether the arguments on which the Club had failed significantly increased Mr Middeldorp’s costs or otherwise justified a reduction to the award.[23] She considered that they did, principally on the issue of the absence of a power to suspend Mr Middeldorp. She reduced the award by 15 per cent to reflect this.[24]
Court of Appeal
[23]High Court Rules, r 14.7(d) or (g).
[24]First HC costs decision, above n 22, at [62].
On the appeal, because the “honours were broadly even”, no costs award was made in either party’s favour.[25] The Court was silent on the position concerning costs in the High Court.
Negotiations
[25]CA substantive decision, above n 115, at [91].
Mr Middeldorp was of the view that, following the appeal, he was the successful party and should have a costs award, with a reduction to reflect that he had not succeeded on all issues. He offered to settle the issue with the Club on a costs lie where they fall basis, which would have entitled him to a refund of the costs he had paid to the Club after the High Court’s first costs decision. The Club did not respond, apparently due to difficulties in meeting during the COVID-19 restrictions. Mr Middeldorp therefore brought the matter back to the High Court for consideration.
High Court decision No 2
The High Court Judge remained of the view that overall the Club was the successful party.[26] This was for the following reasons:[27]
(a)On a quantitative basis Mr Middeldorp had failed on four out of five causes of action.
(b)On a qualitative basis Mr Middeldorp had received relief on one cause of action but it was more limited in scope than that which had been sought. In the Judge’s view, contrary to the submission made on his behalf, the unlawful suspension was not the primary cause of action. It would have been of great significance if Mr Middeldorp had succeeded on the Committee’s operational and election requirements (the fifth cause of action) because the allegation was that the Committee had operated unlawfully since October 2014.
(c)This was not a case where the Court of Appeal had reversed the High Court judgment in its entirety. The High Court’s liability findings had been upheld and the only difference was on the exercise of the discretion to grant relief on the first cause of action.
(d)The Court of Appeal had not quashed the costs order in the High Court and referred it back to that Court for consideration, as it could have it done.[28]
[26]Middeldorp v Avondale Jockey Club Inc [2020] NZHC 1748 [Second HC costs decision] at [15].
[27]At [16]–[21].
[28]Court of Appeal (Civil) Rules 2005, rr 48(4) and 53J.
The Judge did consider it appropriate to reduce the award she had originally made in favour of the Club. She considered a further 10 per cent reduction was appropriate to recognise that Mr Middeldorp’s success was “slightly more” as a result of the Court of Appeal decision than it had been when the costs award was made.[29]
Did the High Court err as to who succeeded?
[29]At [23].
Rule 14.2(1)(a) of the High Court Rules provides the general principle that “the party who fails with respect to a proceeding … should pay costs to the party who succeeds”. This encapsulates the primary principle that costs follow the event unless there are exceptional circumstances.[30] The submission for Mr Middeldorp is that, because he was successful in obtaining some relief, he is the successful party for the purposes of r 14.2(1)(a).
[30]Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].
In support of his submission Mr Middeldorp refers to two decisions.[31] Both concern claims for damages in which the damages award to the plaintiff was substantially less than the sum claimed. In those decisions this Court overturned decisions of the High Court that had declined awards of costs to the plaintiff because of their limited success. In doing so, it reiterated that the unsuccessful party is the party adjudged liable to pay money to the other.[32] The fact that the party had less success than claimed is considered under r 14.7 of the High Court Rules, which gives the Court the discretion to reduce the award of costs or refuse to make an award.
[31]Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 (leave to appeal dismissed: Midgen Enterprises Ltd v UV Water Systems Ltd [2017] NZSC 68); and Weaver v Auckland Council [2017] NZCA 330, (2017) 24 PRNZ 379.
[32]Water Guard NZ Ltd v Midgen Enterprises Ltd, above n 31, at [13]; and Weaver v Auckland Council, above n 31, at [20] and [26].
Outside of a damages claim, it can sometimes be more difficult to identify a winner. An example is Packing In Ltd (in liq) v Chilcott.[33] This involved an application to set aside notices issued by the liquidators under s 294 of the Companies Act 1993 in relation to 14 voidable transactions. The affirmed notices represented more than half of the overall value of the transactions covered by the notices. This Court considered that success or failure was better assessed by a realistic appraisal of the end result.[34]
[33]Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA), discussed in Weaver v Auckland Council, above n 31, at [22]–[25].
[34]At [6].
Another example is Okey v Kingsbeer.[35] The substantive proceeding was an application under the Property Law Act 2007 for an order extinguishing an equitable grant of easement or, in the alternative, an order that the respondent was to bear the costs of bringing the access up to standard. After an appeal to this Court, the application to extinguish the easement failed and an order was made directing that the respondent was to meet 75 per cent of the upgrade costs and the applicant was to meet the balance.
[35]Okey v Kingsbeer [2017] NZCA 625, (2017) NZCPR 25.
The High Court considered it was not straightforward to determine who was the successful party because the application to extinguish the easement was the main issue of fact and law, but the applicants had succeeded on their alternative and had received a costs order greater than that which they had offered prior to trial. Standing back, the Judge considered the applicants were the successful party but the costs award should be reduced by 50 per cent because of their lack of success on the main cause of action.[36]
[36]Kingsbeer v Okey [2018] NZHC 3309 at [20]–[23].
An appeal by the respondent, based on the contention that it was the substantially successful party, was dismissed.[37] The Court considered there had been no error in the approach taken in the High Court, saying:
[14] This was one of those cases in which the High Court was justified in considering not only which party won the principal contest at trial, but also making a realistic overall appraisal of the end result. We endorse the approach [the High Court Judge] followed and the result he reached.
[37]Okey v Kingsbeer [2019] NZCA 419.
In this case there were, in effect, three judicial review proceedings rolled into one claim because Mr Middeldorp challenged three distinct matters and sought three separate and distinct declarations. He succeeded on one of these challenges and failed on the other two. We consider that in a case like this, it was open to the Judge to view the Club as the successful party. On a realistic appraisal, the Club had greater success than Mr Middeldorp because it had successfully resisted relief in relation to two of the challenged matters and Mr Middeldorp had succeeded in obtaining relief on only the one.
We acknowledge Mr Middeldorp’s submission that, on the one matter on which he succeeded, there were two unlawful decisions. However, that does not mean that he and the Club were equally successful overall. On that argument, the Club was successful on the 14 applications for membership that were challenged. The reality is that the two suspension decisions raised a single issue (where there was a power to suspend) and Mr Middeldorp failed on his other two causes of actions relating to those suspension decisions. It is appropriate in these circumstances to focus on the success or failure on the three distinct matters that were challenged, rather than to carve them up in more minute detail.
We also acknowledge Mr Middeldorp’s point that the vindication he received through the declaratory relief on the suspension decisions was of significance to him. But the same is true of the Club’s vindication on the other two issues through its success in opposing the award of any relief on these issues.
Lastly, we reject Mr Middeldorp’s submission that the Judge’s approach amounts to tearing up the rules on costs and is inconsistent with the predictability that those rules are intended to provide. The successful party in judicial review proceedings involving one decision, or several decisions of the same kind, will normally be the party who either obtained relief or resisted it. But there can be other considerations at play. For example, if the proceeding is in the public interest,[38] there may be no award of costs against an unsuccessful plaintiff and it is rare for costs to be awarded against a judicial body whose decision is the subject of the review.
[38]High Court rules, r 14.7(e).
Returning to the approach on costs appeals quoted earlier, “[t]he overall objective is to achieve an outcome that best meets the interests of justice in the given case in accordance with any applicable costs rules and consistent with established principles”.[39] In a case where there were, in effect, three judicial review proceedings combined into one, it was consistent with r 14.2(1)(a) and the interests of justice to view the Club as the overall successful party, as it succeeded on two of the claims and lost on just on the one.
[39]Kinney v Pardington, above n 2, at [1].
It follows that we reject Mr Middeldorp’s submission that the Judge erred in law and principle and was plainly wrong in finding that the Club remained the successful party following the appeal. That was the only ground of appeal. Mr Middeldorp did not challenge the size of the Judge’s reduction if that ground failed. It would of course have been difficult to do so given the advantages the Judge had over this Court as to the relative time involved in, and significance of, the respective claims.
Result
The appeal is dismissed.
The respondents are entitled to one set of costs in this Court for a standard appeal on a band A basis plus any disbursements.
Solicitors:
Wilson Harle, Auckland for Appellant
LeeSalmonLong, Auckland for Respondent
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