Mills v Dalzell

[2022] NZHC 3067

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2022-454-9

[2022] NZHC 3067

UNDER

Parts 12 and 15 of the High Court Rules

BETWEEN

LYNETTE JOY MILLS

First Plaintiff

CARL JAMES PETERSON
Second Plaintiff

AND

KELLY DALZELL

First Defendant

TRACY LEVENBACH
Second Defendant

ASB BANK LIMITED

Third Defendant

GRAHAM HOWARD MILLS
Fourth Defendant

JOHN LEVENBACH
Fifth Defendant

CAROL KRAMMER

Sixth Defendant

Hearing:

On the papers

Appearances:

Plaintiffs in person

B J Upton and S L Hawksworth for First and Third Defendant No appearance for Second Defendant
J R Sparrow and S T Hartley for Fourth Defendant
B R Webster and W L Abrie for Fifth and Sixth Defendants

Judgment:

23 November 2022

MILLS v DALZELL [2022] NZHC 3067 [23 November 2022]

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[Costs]

[1]                 In my substantive judgment dated 23 September 2022 I struck out the plaintiffs’ claim in its entirety. In the concluding paragraph I reserved costs in the expectation that the parties would be able to resolve these. Regrettably, they have not been able to do so. I now have memoranda from the three groups of defendants (the first and third defendants; the fourth defendant; and the fifth and sixth defendants — the second defendant has died and her personal representative or representatives have not entered an appearance). The plaintiffs, who are self-represented, have replied.

[2]                 As a result of the fact that there are several parties involved, with different interests, there is a substantial amount of material before the Court in relation to costs. Having regard to the terms of the plaintiffs’ response, to which I will come in due course, I do not propose to analyse this material in detail. In any event, costs determinations do not usually call for lengthy judgments, unless of course they raise new issues.

[3]                 The basic principles are well established and very clear. Costs are governed by pt 14 of the High Court Rules 2016. They are quintessentially a matter for the Court’s discretion, though, of course, like all discretions, this must be exercised on a principled basis. The starting point is that costs generally follow the event, that is to say that the successful party is entitled to a costs award. As to quantum, the presumption is that, in all but exceptional cases, costs are awarded in accordance with the scales in the schedules to the rules. Those schedules are intended to introduce an element of objectivity into costs assessments so that costs are predictable and litigants and their advisers know, from the outset, the likely range of any costs award. The costs regime, however, does recognise that there are exceptional cases and confers on the Court a discretion to award decreased and increased costs in exceptional cases. At one extreme that extends to awarding the successful party increased scale costs or even solicitor-and-client (indemnity) costs.

[4]                 In this case, all three groups of defendants who were represented at the hearing seek increased costs.

[5]They do so pursuant to r 14.6:

14.6     Increased costs and indemnity costs

(1)Despite rules 14.2 to 14.5, the court may make an order—

(a)increasing costs otherwise payable under those rules (increased costs); or

(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).

(2)The court may make the order at any stage of a proceeding and in relation to any step in it.

(3)The court may order a party to pay increased costs if—

(a)the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)failing to comply with these rules or with a direction of the court; or

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c)the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d)some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

(4)The court may order a party to pay indemnity costs if—

(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[6]                 The defendants contend that the Court would be justified in ordering increased scale costs or indemnity costs by reason of one or more of the factors referred to in   r 14.6(3) or (4).

[7]                 I focus on Mr Upton’s submissions on behalf of the first and third plaintiffs, simply because of the order in which the defendants are cited in the proceeding.

[8]                 Mr Upton refers the Court to the observations of French J in J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No. 2),1 to which the New Zealand Court of Appeal referred in Ben Nevis Forestry Ventures Ltd v CIR,2 that indemnity costs are available where “a party persists in what should on proper consideration be seen as a hopeless case”. He submits on the basis of those observations that a case need not involve misconduct in the usual sense. It is enough

1      J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers  (WA Branch) (No. 2). [1993] FCA 42.

2      Ben Nevis Forestry Ventures Ltd v CIR (2014) 22 PRNZ 322 at [15].

if a party persists in prosecuting what that party know or ought to have known was a hopeless case so as to require the other side unnecessarily to incur costs.

[9]                 Mr Upton submitted that the Court, without great difficulty, was able to conclude that the plaintiffs’ claim could not succeed.

[10]             He emphasises that a core allegation of the case was fraud on the part of the fourth defendant in which it was asserted the other defendants were implicated, and that the Court concluded that there was no evidence to support the allegation of fraud.

[11]             Mr Upton says that the plaintiffs’ claims were advanced with what he refers to as a “wilful disregard of known facts or established law”. For example, the plaintiffs commenced their claim despite the clear terms of a Settlement Deed preventing the claims — at least against the defendants other than the fifth and sixth defendants — from being brought, as the Court found.

[12]             On the basis that the plaintiffs’ case was doomed to fail  from the outset,     Mr Upton invites the Court to infer that they had an improper ulterior motive for the commencement of the proceeding, that being to avoid meeting their obligations under the deed of settlement.

[13]             I accept the submission that this case was hopeless in the sense used in the cases already referred to. My reasons striking it out were set out in my substantive judgment. In this costs judgment it is only necessary to record that at least in relation to the first, third and fourth defendants (and necessarily also in relation to the second defendant) the deed of settlement expressly precluded any further claim in relation to the factual matters; second that in relation to all defendants the underlying theme of the proceeding being an assertion of fraud on the part of the fourth defendant which the other defendants were said to be implicated could not be established on the facts and third in any event, and quite independently, the plaintiffs’ claim was time-barred.

[14]             Although the plaintiffs are acting for themselves, it struck me that Mr Peterson was well versed in the case at least and on top of the principles involved. I am quite

satisfied therefore that Mr Peterson and Ms Mills were, or should have been aware, that this claim could not succeed.

[15]             In those circumstances it is difficult indeed to see any genuine motivation for the proceeding other than an attempt to avoid the contractual commitments they had made in the deed.

[16]             Counsel for all three groups of defendants submit that in those circumstances the Court should award increased costs.

[17]             In my view,  it is appropriate for the Court to have regard to the fact that     Mr Peterson and Ms Mills are acting for themselves and have not as I am aware had the benefit of robust independent advice in relation to the merits of the case or the risks they faced. That, it seems to me, must be brought to account in making an assessment about costs.

[18]             To an extent, that is reflected in Mr Peterson’s response on their behalves. His memorandum is headed “APPLICATION BY MEMORANDUM TO STAY THE COSTS ORDERS OF A J JOHNSTON UNTIL THE APPEAL HAS BEEN DETERMINED”. As that suggests, Mr Peterson fails altogether to focus on the costs applications that he and  Ms Mills face.   Rather his contention is that, as he and    Ms Mills have appealed from my judgment, the Court ought to “stay the costs orders of A J Johnston until the appeal has been determined”. The position is that until now no costs orders have been made to which a stay could apply.

[19]             I treat this as a contention that the Court should not make any costs orders because of the appeal.

[20]             It is elementary that an appeal does not operate as a stay, and equally straightforward that the Court should determine costs at this stage so that all matters are before the Court of Appeal.

[21]             Standing back from the matter as best I can, the view I have reached is that whilst this case does reach the threshold for an order for indemnity costs, substantial

justice will be done if the Court makes an order entitling all three groups of defendants to scale costs, but with an uplift in each case of 33 per cent to reflect circumstances traversed in this judgment. That will at least mean that the defendant groups are able to recover their full legal costs as those are objectively assessed in accordance with the schedules to the Rules.

[22]             I am not ignoring that one of the bases upon which indemnity costs are sought, at least by the first, third and fourth defendants, is that the settlement agreement provided for the same. However, it appears to me that that clause is directed at enforcing the agreement rather than defending new proceedings.

[23]             The plaintiffs will pay to each of the three groups of defendants scale costs at a 2B rate increased by 33 per cent.

Associate Judge Johnston

Solicitors:

Simpson Grierson, Auckland for First and Third Defendants Holland Beckett, Tauranga for Fourth Defendant

Morgan Coakle, Auckland for Fifth and Sixth Defendants