MONIQUE HUNE LYNCH and LUKE ALEXANDER SANSOM s AND FCL CL LIMITED, as trustee of the FCL CL TRUST
[2024] NZHC 2978
•14 October 2024
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2024-425-42
[2024] NZHC 2978
UNDER the Land Transfer Act 2017 IN THE MATTER
of an application for an order under s 143 of the Land Transfer Act 2017 that a caveat not lapse
BETWEEN
MONIQUE HUNE LYNCH and LUKE ALEXANDER SANSOM
Plaintiffs
AND
FCL CL LIMITED, as trustee of the FCL CL TRUST
Defendant
CIV-2024-425-41 UNDER
the Land Transfer Act 2017
IN THE MATTER
of an application for an order under s 143 of the Land Transfer Act 2017 that a caveat not lapse
BETWEEN
MARTA YATES
Plaintiff
AND
FCL CL LIMITED, as trustee of the FCL CL TRUST
Defendant
Hearing: (On the papers) Appearances:
D G Chesterman for Applicants S A Grant for Respondent
Judgment:
14 October 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
(Costs)
LYNCH v FCL CL LIMITED [2024] NZHC 2978 [14 October 2024]
[1] On 31 July 2024 (the July judgment), I issued a judgment in respect of two separate proceedings granting in each matter specific performance by way of summary judgment against the defendant.1 Mr Chesterman was counsel for the plaintiffs in each proceeding. Mr Chesterman had requested that he be heard on costs and costs memoranda have now been filed.
[2] Mr Chesterman seeks an award of costs on each proceeding, if not on an indemnity basis, then with a substantial uplift on 2B costs.
[3] As was inherent in the issue of a joint judgment in respect of both proceedings, I recorded that the purchasers in the two proceedings were in the same position. Counsel did not suggest the outcome of the applications should differ. While there were some factual differences in the positions of the two plaintiffs, such were not material. Each plaintiff had a separate instructing solicitor but, as I have said, the same counsel.
[4] As recorded in the July judgment, the purchasers had successfully applied to sustain caveats they had lodged over the vendors’ property. With the parties’ positions having been aired in full detail at the caveat hearing, much of that material was re-used for the summary judgment hearing.
[5] The pleadings in both cases were essentially the same with only detail changes to reflect the different identities of the parties, dates of agreements and dates of other events. It was responsible of counsel to agree to efficiently re-use the materials from the caveat hearing.
[6]The plaintiffs seek indemnity costs.
[7] Indemnity costs are sought pursuant to r 14.6(4)(a) of the High Court Rules 2016 (the Rules) on the basis the defendant, FCL CL Limited, as trustee of the FCL CL Trust (FCL), acted vexatiously, frivolously and improperly or unnecessarily by continuing to defend the proceedings.
1 Lynch v FCL CL Ltd [2024] NZHC 2117.
[8] Mr Chesterman submits that FCL knew its basis for defending the claims was groundless.
[9] Mr Chesterman refers to Associate Judge Paulsen’s conclusion from the caveat decision that:2
The fundamental difficulty for the [vendor] is that on the evidence the [purchasers] have satisfied me that construction of the development was not prevented or impractical at any stage, continued throughout and will continue to completion.
[10] In respect of the funding issue, Mr Chesterman refers to Judge Paulsen’s conclusion that:3
the [vendor] has obtained further funding to complete the development. It appears it had positive indications … in July 2023, albeit the formal funding facility documentation was signed later.
[11] Mr Chesterman describes these as clear factual findings over and above the threshold that applied in the caveat context, that is, whether the purchasers’ application to sustain their caveat was “clearly arguable”.
[12] Mr Chesterman submits that as against this background, there was practically an onus on the vendor to advance further evidence at the summary judgment hearing to meet Associate Judge Paulsen’s conclusions.
[13] This point can only be taken so far. As I noted in the July judgment, the threshold a purchaser applying to sustain a caveat has to meet is quite different from the burden that same purchaser has to meet when seeking summary judgment against the vendor.
[14] An alternative ground in support of a claim for indemnity costs in favour of the purchaser, Ms Yates, is that at the time the defendant was seeking to invoke its force majeure clause, the vendor wrote to Ms Yates threatening to cancel the contract if she did not increase her purchase price, with a veiled threat that she would lose her deposit if she did not accept cancellation.
2 Lynch v FCL CL Ltd [2024] NZHC 700 at [37].
3 At [38].
[15] This is pre-litigation conduct which has not been accepted as a basis of an award of indemnity or increased costs.4
[16] The vendor did file further evidence as to the continuation of work on the site between the purported cancellation and what might be described as the full scale commencement of works to address Associate Judge Paulsen’s observation at [9]. That evidence was aimed at explaining that while some work continued, it was largely in the nature of what I described as “mothballing work”, that is making the property secure and watertight. However, that evidence did not address all of the work that was undertaken which was something I noted in my July judgment.
[17] In respect of Ms Yates, I do not consider the pre-litigation tone of the correspondence to her warrants an award of indemnity costs even if such could be taken into account.
[18]The purchasers, Lynch and Sansom, received a similar letter to Ms Yates.
[19]In respect of both purchasers, Mr Chesterman submits:
The threats and retention of [the deposit] put the plaintiff at a serious ongoing disadvantage by depriving [them] of much needed cash prior to expensive litigation that so far has involved three hearings – caveat recall and summary judgment with an appeal upcoming.
[20] With respect to Mr Chesterman, I do not see the merit in this point. The only basis upon which the plaintiffs would have been entitled to the return of their deposit was if they had accepted the cancellation of their agreements. Whether there was an implicit threat to forfeit the deposit because the purchasers did not accept cancellation they were never going to receive the deposits from which to fund litigation. The whole point of their litigation was to maintain that the contracts were on foot, in which case the deposits would be retained by the vendor.
4 See, Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR14.1.04].
[21] Nor do I consider this a case where indemnity costs are warranted because of the summary judgment claim being resisted, notwithstanding that the vendor was unsuccessful at the caveat stage.
[22] As I have said, an application to sustain a caveat and an application for summary judgment are very different applications. Some further evidence was filed. It was filed by the vendors and also by the purchasers. The vendors’ submissions had a slightly different focus in respect of the continuation of work. The evidence was that the number of workers on site was greatly reduced and, as I have said, was in the nature of mothballing, save for one area which was unexplained. I do not see that one unexplained area is of itself warranting of indemnity costs.
Should there be an uplift?
[23] The request for an uplift is based on both parties having made Calderbank offers. Ms Yates offered to increase the purchase price for her property by $100,000.
[24] Ms Lynch and Mr Sansom also offered to increase their purchase price. In each case, the offer was without prejudice save as to costs, but in each case the offer had further conditions.
[25] Both proceedings were issued in April 2024. The above offers were made in late 2023 so, as pre-litigation conduct, they are subject to the principle set out at [15] above. Rule 14.6(3)(b)(v) of the Rules refers to failing without reasonable justification to accept an offer of settlement either under r 14.10 or “some other offer to settle or dispose of the proceeding” (my emphasis). Rule 14.10 refers to a party to a proceeding making a written offer to another party at any time, that is, without prejudice save as to costs and relates to an issue in the proceeding. The language in r 14.10 does not sit easily with the idea of pre-litigation offers being relevant to r 14.6, that is, before a proceeding is issued.
[26] The commentary in McGechan on Procedure, referring to r 14.6(3)(b)(v) says, “All offers are encompassed by the rule …” but in the context of saying the rule is not restricted to Calderbank offers.5
[27] However, ultimately costs are at the discretion of the Court.6 The overall objective is to achieve an outcome that best meets the interests of justice.7
[28] Here, as I discuss below, the defendant seeks a reduction against 2B costs for each proceeding. It is in that context I consider the pre-commencement offers can be taken into account, that is, whether the defendant should be able to argue for a reduction in scale costs when there is a strong implication that the Court is to apply the costs regime in the absence of some reason to the contrary.
[29] A consideration of whether there should be an uplift needs to take place against the submissions raised by Ms Grant, counsel for the vendor, that because of the efficiencies in how the two claims were run, that is, the similarity in their pleadings and the re-use of material from the caveat hearing, that there should be a reduction from costs on a 2B basis.
[30] Counsel should, of course, be encouraged to achieve efficiencies where possible. Equally, both plaintiffs made offers to settle met, it seems, with a simple rejection.
[31] In my view, the fair outcome in these proceedings is to award each plaintiff costs on a 2B basis with no reduction or uplift. Ms Grant’s suggestion that costs should be reduced because of efficiencies is countered by the Calderbank offers.
[32] The result is that the plaintiffs’ actual costs are still significantly more than scale costs. I do not consider it to be a reasonable costs outcome to reduce scale costs notwithstanding the efficiencies I have referred to, when the settlement offers made by the plaintiffs were simply rejected. The reality is that the vendor should have seen litigation risk following the caveat hearing and been prepared to explore settlement
5 McGechan on Procedure, above n 4, at [HR14.6.02(3)(a)(iii)].
6 High Court Rules 2016, r 14.1.
7 McGechan on Procedure, above n 4, at [HR14.1.02].
which the plaintiffs had indicated they were willing to consider from early on in the dispute.
[33]Accordingly, there is an award of costs in favour of Ms Yates in the sum of
$19,352.15 together with disbursements in the sum of $2,858.73.
[34] There is a joint award of costs in favour of Ms Lynch and Mr Sansom in the sum of $19,352.15 together with disbursements in the sum of $2,732.35.
[35] Each of the plaintiffs are entitled to costs on a 2B basis for the preparation of their applications for costs on the basis of Item 11, that is 0.4 of a day for the fixing of costs. For the avoidance of doubt, this award is in addition to the above award of costs.
Associate Judge Lester
Solicitors:
AWS Legal, Queenstown (for Applicant) Foley Hughes, Auckland (for Respondent)
Copy to counsel:
D Chesterman, Barrister, Auckland S Grant, Barrister, Auckland
0