Mulholland v Mulholland
[2023] NZHC 3853
•21 December 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-000111
[2023] NZHC 3853
BETWEEN VICKY-LEE MULHOLLAND
Plaintiff
AND
BRENT EDWARD MULHOLLAND
First Defendant
ELE HOLDINGS LIMITED
Second Defendant
Hearing: On the papers Appearances:
W Hofer for the Plaintiff
R J Gordon and S C Howard-Brown for the First Defendant
Judgment:
21 December 2023
COSTS JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 21 December 2023 at 2.30 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Tompkins Wake, Hamilton
MinterEllisonRuddWatts, Wellington
MULHOLLAND v MULHOLLAND [2023] NZHC 3853 [21 December 2023]
Introduction
[1] The first defendant has filed a memorandum seeking costs following the plaintiff’s unsuccessful interlocutory application for leave to bring a summary judgment application.1 In the judgment I held that the respondent had succeeded and so was entitled to costs and that my preliminary view was that costs ought to be awarded on a 2B basis. I asked the parties to confer and only if agreement could not be reached to file memoranda.
[2]The parties have not been able to agree and have filed memoranda.
[3]The first defendant, Brent Mulholland (“Brent”) seeks costs on a 2B basis of
$11,830.50 plus disbursements of $444.43 although noting that 2C costs could properly be fixed. The plaintiff, Vicky Mulholland (“Vicky”) accepts 2B costs are appropriate but considers that costs should be reserved until the determination of her substantive claim.
[4] I set out the relevant costs principles before applying them to the circumstances of this case.
Relevant costs principles
[5] The starting point in any costs decision is r 14.1 of the High Court Rules 2016 which confirms that all matters relating to costs are at the court’s discretion. The discretion vested by r 14.1 is wide but must be exercised subject to the general principles in r 14.2 and the remaining costs provisions.
[6] Rules 14.3 to 14.5 provide for: the calculation of scale costs through the categorisation of proceedings; appropriate daily recovery rates; and the determination of a reasonable time for each step for the purposes of r 14.2(1)(c) by reference to the time specified in sch 3 of the High Court Rules.
1 Mulholland v Mulholland [2023] NZHC 1692.
[7]Rule 14.8 provides:
14.8 Costs on interlocutory applications
(1)Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—
(a)must be fixed in accordance with these rules when the application is determined; and
(b)become payable when they are fixed.
(2)Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.
(3)This rule does not apply to an application for summary judgment.
[8] On the basis of this rule, absent special reasons to the contrary, costs on interlocutory applications other than summary judgment ought to be fixed at the time the application is determined.
[9] 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:2
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 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.
Submissions
[10] The plaintiff submits that where the merits of a particular application and the merits of the substantive proceeding are the same, then the general approach to interlocutory applications ought to be inapplicable, just as it is in relation to a summary
2 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA) at 4.
judgment application. The plaintiff refers to the passage above from NZI Bank Ltd v Philpott and a later passage where the Court of Appeal held:3
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.
[11] On this basis the plaintiff submits that there is a special reason pursuant to r 14.8(1) not to fix costs and instead for costs to be reserved until the defences raised have been determined in the substantive proceedings. The plaintiff says this is for the same reason that underlies r 14.8(3).
[12] Counsel for the plaintiff submits that the main basis for the first defendant’s opposition to the leave application was that summary judgment would fail because:
(a)of factual disputes which the first defendant submitted meant that the matter could not be resolved on a summary judgment basis; and
(b)on the basis of the defence of nullus commodum capere potest injuria sua propria, that the plaintiff may not take advantage of the non- performance of her own duties and obligations as a director of Ele Holdings Limited (“EHL”) to now assert breach by first defendant.
[13] Counsel for the plaintiff submits that the rationale behind r 14.8(3) is equally applicable in respect of the leave application and that it is premature to fix costs because it may turn out that the plaintiff ought to have been granted leave and ought to have been able to proceed by way of summary judgment. The fact that the merits of the leave application and the merits of the substantive proceeding are the same gives
3 At 5.
a special reason under r 14.8(1) not to fix costs—as would be the case with summary judgment.
[14] Counsel for the plaintiff accepts that the Court may still make awards of costs on unsuccessful applications for summary judgment when it should have been clear to the applicant/plaintiff that there was considerable scope for argument, and that their claim was not suitable for summary judgment. However, counsel for the plaintiff submits that the principle does not apply to the present case because:
(a)The plaintiff’s application for leave was not an application for summary judgment so the principle simply does not apply.
(b)Even if it does apply by analogy, the principle fails here. The plaintiff was aware that there would be scope for argument on the more contentious aspects of her claim (for example, breach of quasi-partnership) so instead of including her whole claim in the summary judgment application, the plaintiff identified discreet instances where she considered there was deemed unfairly prejudicial conduct pursuant to s 175 of the Companies Act 1993, therefore making it amenable to summary judgment.
(c)Counsel for the plaintiff further submits that the nature of the defendant’s opposition is telling and that rather than providing robust substantive defences to Vicky’s claims, Brent’s opposition was targeted at muddying the water rather than responding to the deemed unfairly prejudicial conduct in substance, pointing to the fact that Brent did not swear any affidavit in support of the opposition.
[15] Counsel for the first defendant submits in response there are no special reasons for costs not to be determined at the time of the application as required by r 14.8. The first defendant submits that this is a straightforward case of the plaintiff choosing to pursue an interlocutory application in full knowledge of the risks entailed with it, and that application failing.
[16] Furthermore, the first defendant submits the plaintiff is seeking to apply r 14.8(3) to the different circumstances here without authority and that this is misconceived because:
(a)Subrule (3) applies to “an application for summary judgment” and this application is clearly not that, it was an interlocutory application for leave pursuant to r 12.4(2) necessitated because of “the plaintiff’s tactical desire to change tack”, and because an application for summary judgment was not now open to her.
(b)In any event, even if sub-rule (3) did apply to the plaintiff’s interlocutory application, that carve-out is not absolute with the Court still making awards on unsuccessful applications for summary judgment when it should have been clear to the applicant/plaintiff that there was considerable scope for argument, and that their claim was not suitable for summary judgment.4
[17] The first defendant therefore maintains that this is an entirely proper case for costs to be fixed on a 2B basis now. The first defendant in fact submits that this approach may fairly be described as generous to the plaintiff as costs on a 2C basis may have been more appropriate.
Discussion
[18] I agree that r 14.8(3) does not apply here because the application was an application for leave rather than an application for summary judgment itself. However, I consider that a special reason to the contrary might be where the application is similar to a summary judgment application in that if ultimately the plaintiff does succeed then it may be appropriate for the defendant to pay for both the unsuccessful application and the substantive proceedings, the Court paying particular attention to the reasons why the plaintiff was unsuccessful in the first case.
4 Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd [2016] NZHC 1244; Buller Coal Ltd v Brightwater Engineers Ltd [2015] NZHC 248; and Air Nelson Ltd v Airways Corporations of New Zealand Ltd (1992) 6 PRNZ 1.
[19] Here, although the application was for leave, the reason for the plaintiff’s failure was not because of the four month delay in bringing the summary judgment application (which was the reason leave was required) but instead following an assessment of whether the merits could be determined on a summary basis and the ability to determine liability in advance of quantum.
[20] I consider that an analogy can be drawn therefore between this leave application and a summary judgment application. I further record that if r 14.8(3) applies by analogy, then the exceptions to that rule, where for example a summary judgment application is brought unreasonably, must also apply by analogy.
[21] Reserving costs on summary judgment applications is to encourage the use of the summary judgment procedure to efficiently resolve proceedings, recognising that it may be difficult to determine who should pay costs until the litigation is complete, and that even an unsuccessful application might ultimately prove beneficial to the parties in efficiently resolving the dispute.
[22] Costs are not reserved on the basis that if the plaintiff succeeds at the substantive hearing, then it shows they ought to have succeeded on summary judgment (as counsel for the plaintiff appears to submit). It is because if after a full hearing the merits of a claim are in a plaintiff’s favour then that may mean any costs on an unsuccessful summary judgment application should also be awarded in the plaintiff’s favour. I agree that in some summary judgment applications it will still be appropriate to award costs following the application where the plaintiff’s application has been commenced erroneously, unreasonably or in circumstances where the plaintiff ought to have known that summary judgment would not be granted.5 But these exceptions are for clear cases. Often it will be difficult to assess at the time of the summary judgment (or here, by analogy, the leave application) as the passages referred to above in NZI v Philpott explain.
[23] The application in this case was not clearly inconsistent with applicable law nor were there limitation defences or similar that were likely to prevent the claims. I
5 Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd, above n 4, at [9]; and Mason v Dodd [2020] NZHC 2005 at [10].
accept there were considerable difficulties with the intended summary judgment application considered in the leave application bringing it close to a borderline case. However in the end I consider it is appropriate to reserve costs so that the factual matters raised can be determined first. This will allow costs to reflect the merits of the parties’ positions if that is appropriate.
[24] Therefore, although I held in the judgment that costs ought to be awarded to the first defendant now, after reflection I consider that costs ought to be reserved. A clear analogy can be drawn between this leave application and a summary judgment application where costs are reserved to allow the outcome on the defences raised to be determined first. This approach is appropriate in this case and so provides a special reason in terms of r 14.8(1) why costs ought not to be payable now. I note that r 14.8(2) allows the original order made in the judgment to be varied.
Result
[25] Costs on the plaintiff’s application for leave to bring a summary judgment application are reserved.
[26] For the assistance of the trial judge I record that costs on a 2B basis appear to be appropriate.
Associate Judge Sussock
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