New Zealand New Oak Property Limited v Eco Earth NZ Limited
[2025] NZHC 1809
•3 July 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-002312
[2025] NZHC 1809
BETWEEN NEW ZEALAND NEW OAK PROPERTY LIMITED
ApplicantAND
ECO EARTH NZ LIMITED
Respondent
Hearing: On the papers Appearances:
M Mabbett for the Applicant P Murray for the Respondent
(Respondent self-represented after 10 April 2025)
Judgment:
3 July 2025
JUDGMENT OF WALKER J
[Costs]
This judgment was delivered by me on 03 July 2025 at 12 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors:
Martelli McKegg, Auckland
Copy to:
The respondent
NEW ZEALAND NEW OAK PROPERTY LIMITED v ECO EARTH NZ LIMITED [2025] NZHC 1809 [3 July 2025]
[1] This lease dispute between the landlord, New Zealand Oak Property Limited (New Oak), and its former tenant, Eco Earth NZ Limited (Eco Earth), takes the form of an originating application under the Property Law Act 2007 (PLA) for cancellation of the lease and application for payment of rent and compensation.
[2] Shortly before a two-day urgent hearing, the parties reached a consent position in which the lease was cancelled. Issues of compensation and payment of rent were subsequently referred to arbitration or parallel Environment Court proceedings. Orders were accordingly made including the stay of the substantive proceeding save for costs pending conclusion of arbitral proceedings between the parties.1
[3] The question of costs is now for determination. The parties have agreed that this issue is to be dealt with on the papers. They have filed comprehensive written submissions which have been referred to me as Duty Judge.
[4] New Oak seeks indemnity costs and disbursements under r 14.6(4)(e) of the High Court Rules 2016 (HCR) and the underlying Deed of Lease between the parties. It claims a total of $118,896.26. It also seeks costs of $8,220 in relation to its costs application.
[5] Eco Earth accepts that New Oak is entitled to indemnity costs under the Deed of Lease but opposes New Oak’s application. There are three limbs to its opposition. First, it argues that an order for costs is premature since the proceeding is effectively ongoing so the Court should exercise its discretion not to order costs at this stage. Secondly, it says that should costs be fixed at this stage, enforcement of the costs order ought to be stayed pending the outcome of the proceeding. Thirdly, it disputes the reasonableness of the quantum claimed.
Background
[6] New Oak is the owner of a 5,500 square metre site property at 28 Smales Road, East Tamaki, Auckland (the Site). A previous tenant of the Site left approximately 9,000 cubic metres of dirt and concrete on the Site.
1 New Zealand New Oak Property Limited v Eco Earth NZ Limited HC Auckland CIV-2024-404-2312, 10 April 2025 (Minute of Robinson J).
[7] New Oak says that Mr Williams, a director of Eco Earth, agreed to lease the Site on an “as is” basis and to remove the material on the Site in exchange for a rent reduction and rent holiday. Negotiation of formal lease terms followed and were recorded in an exchange of emails.
[8] The Deed of Lease was signed and witnessed on 27 June 2023 (June Deed of Lease). Eco Earth contends that New Oak’s property manager added further terms to the June Deed of Lease after it was executed, but it does not appear that those purported terms are pertinent at this stage of the assessment since there is no dispute about the terms New Oak relied on in this proceeding.
[9]The key terms of the June Deed of Lease were:
(a)Annual rent was $90,000 in addition to payment of 100 per cent of outgoings including rates (First Schedule, cl 8 and 16).
(b)The obligation to pay the rent without set-off (Second Schedule, cl 1.1. See also cl 28.1 and 43.4).
(c)The term was two years (to 8 May 2025) (First Schedule, cl 6), with a right of renewal for a further three years so long as the tenant was not in breach (Second Schedule, cl 32.1).
(d)A rent holiday was granted for the first four months of the lease (Rent Holiday) (Third Schedule, cl 48.1).
(e)A rent reduction of $45,000 was granted for the first year of the lease term (Rent Reduction) (Third Schedule, cl 48.2).
(f)The premises were leased “as is” in the condition as vacated by the previous tenant without any obligation on the Lessor to rectify the premises (Third Schedule, cl 50 para 1).
(g)The tenant was “obligated to vacate the premises in a clean and waste-free condition, ensuring the removal of all debris and personal
property by the termination of the lease. Furthermore, it [was] the tenant’s responsibility to perform backfilling and levelling of the site, utilizing metal materials” (Third Schedule, cl 50 para 3).
(h)The permitted business use was “Concrete Crushing and Machinery and Vehicle Storage” (First Schedule, cl 13).
(i)The tenant covenanted, among other things, not to cause a nuisance (Second Schedule, cl 22.1(d)), and to comply with notices issued by competent authorities (Second Schedule, cl 21.1).
[10] Material for present purposes is cl 6.1 of the June Deed of Lease which provides:
…The Tenant shall pay the Landlord’s reasonable costs incurred in considering any request by the Tenant for the Landlord’s consent to any matter contemplated by this lease, and the Landlord’s legal costs (as between lawyer and client) of and incidental to the enforcement of the Landlord’s rights remedies and powers under this lease.
[11] Problems began in or around September 2023, following a visit to the Site by Auckland Council. It is likely this arose after complaints from neighbours. Subsequently, Eco Earth complained about blocked drains on the Site. It proposed a drainage solution involving reasonably extensive works which it was prepared to carry out but not also pay rent and rates. New Oak contends that the work was not done, but this is not clear from the material currently before the Court.
[12] Auckland Council issued abatement notices including one dated 5 April 2024, requiring Eco Earth to cease bringing more fill onto the property.
[13] Eco Earth issued an invoice on 12 April 2024, which was sent to the property managers and provided to New Oak on 27 May 2024.
[14] On 13 June 2024, New Oak served a notice under ss 244, 245 and 246 of the PLA alleging failure to pay rent. Eco Earth disputed its liability and referred to the Site work it had done.
[15] On 25 June 2024, New Oak served a further notice under ss 244 and 246 of the PLA requiring Eco Earth to remedy breaches in the form of failure to abide the Council abatement notices and causing a nuisance to neighbouring properties.
[16]Around that time Auckland Council instituted Environment Court proceedings.
[17] New Oak commenced this proceeding on 9 September 2024 by originating application, for possession of the Site and compensation under s 251 of the PLA. It sought orders cancelling the lease, removal of all equipment from the Site, payment of rent and outgoings, and compensation for the costs of removal of the material on the Site including an interim payment representing half of the estimated costs of removal. It also sought indemnity costs.
[18] It applied for (and was granted) a priority fixture on the grounds that an order for possession needed to be made so that material said to be attributable to Eco Earth’s breaches of lease could be safely removed from the property during the summer months (being the earthworks season).
[19] Eco Earth denied all allegations. It brought a cross application for relief against cancellation of the lease and counterclaimed for work undertaken on the property and for damages.
[20] Before the priority fixture could be heard, the parties reached an agreed position (in two stages) to allow orders to be made by consent and to enable the priority fixture to be vacated. The orders made by consent were:
(a)Cancellation of the lease.
(b)Deferral of matters relating to rent and outgoings owed to (yet to be commenced) arbitral proceedings, and the compensation for remediation costs to the Environment Court.
[21] The cancellation orders were made expressly without any admission of liability by either party and without prejudice to the parties’ respective positions which were also fully reserved in all respects.
Costs claim
[22] The costs claim is based on a time cost basis for attendances in connection with this proceeding which purports to remove overlapping matters. New Oak has provided a comprehensive breakdown of rates and hours of authors working on the proceedings, a monthly summary of costs showing deductions made to reflect the ambit of the costs clause in the lease, and invoice narrations.2
The costs claim covers the following steps:
(a)strategy advice arising from the breakdown in relationship with the leasing agent, complaint received from a neighbour and Council’s abatement notices;
(b)taking detailed instructions (including document reviews) on the history between Eco Earth, New Oak and the property manager;
(c)information gathering (obtaining files from Council under the Local Government Official Information and Meetings Act 1987 and instructing a private investigator);
(d)attempting to engage with Eco Earth on a “without prejudice” basis and subsequently its lawyer;
(e)preparing two detailed PLA notices;
(f)commencing proceedings by way of originating application and seven supporting affidavits;
(g)application for a priority fixture;
(h)responding to Eco Earth’s (belated) application for adjournment; and
(i)drafting submissions and hearing preparation.
2 New Oak submits that this is for a limited purpose without waiving privilege.
[24] The gist of its application is that the landlord was always exercising rights, remedies and powers under the lease and the tenant’s consent to cancellation at the last minute reflects “success” for the purposes of the costs jurisdiction because this was the primary purpose of the PLA proceedings.
[25] Eco Earth submits that there has been no determination on the merits of any of the orders sought in the PLA application and neither party has yet been successful. It argues that the validity or otherwise of the cancellation of the lease remains in issue and Eco Earth is not liable for rent and outgoings because it had no obligation to pay rent in exchange for completion of the drainage work. It seeks damages for the wrongful cancellation, and argues these issues go to the heart of the dispute.
[26] It further contends that if Eco Earth is successful in the arbitration, New Oak would arguably not be entitled to any award of costs. Further, given New Oak’s withdrawal or discontinuance of its compensation claims and interim payment claim, Eco Earth is in fact entitled to costs unless the Court orders otherwise.
[27] Finally, it argues that any award of costs would be unjust as it would likely hamper or prevent Eco Earth’s ability to continue its opposition in the arbitral proceedings.
Legal principles – costs generally
[28] There is a complex background to these proceedings and now parallel proceedings in various fora. Questions of costs are not straightforward against that background because issues of cancellation and compensation overlap. The following principles are relevant:
(a)Costs are at the discretion of the Court subject to the principles set out in the HCR.3
(b)Generally, a party who fails with respect to a proceeding or an interlocutory application should pay costs to the successful party.4
3 High Court Rules 2016, r 14.1.
4 Rule 14.2(1)(a).
(c)There is a presumption that a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.5
(d)A plaintiff bears the onus of displacing that presumption. Exceptions are based on an assessment of who was the successful party.6
(e)On a discontinuance, the Court does not consider the merits of the respective cases unless they are so obvious that they should influence the costs issues.7
(f)The Court will consider the reasonableness of the stance of both parties in the proceeding.8
(g)A consent order is presumptively treated as “success” for an applicant if the consent position reached reflects the orders sought.9
(h)The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However, it must be clear that the plaintiff would have succeeded had the circumstances not changed.10
[29] Eco Earth referred to two authorities which it contends support the proposition that costs are awarded only exceptionally if proceedings have yet to be concluded.11
[30] In van Limberg v Earthquake Commission there had been no discontinuance of proceedings or other end to any part of the proceedings and costs were being sought in respect of the substantive claims.12 The Court declined to award costs on the basis that the proceeding had not been concluded so the application was premature.
5 Rule 15.23.
6 Obrecht v Earthquake Commission [2015] NZHC 555 at [25].
7 Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR15.23.01].
8 At [HR15.23.01].
9 Samson Corporation Limited v Thermosash Commercial Limited [2024] NZHC 51 at [32].
10 The Star Trust v Hamilton City Council [2016] NZHC 821 at [10].
11 Ryde v Earthquake Commission [2014] NZHC 2763 at [27].
12 van Limberg v Earthquake Commission [2014] NZHC 502.
[31] In Ryde v EQC the plaintiffs had filed a notice of discontinuance after settling their claim for compensation for earthquake damage. The settlement did not agree costs and the plaintiffs sought costs from the Court. The Court noted that the plaintiffs bore the onus of displacing the presumption they must pay the defendants’ costs following discontinuance. Finding that: it was reasonable for the plaintiffs to bring the proceeding; the eventual discontinuance indicated the plaintiffs accepted that no further payments were due from EQC; and the merits were not so obvious that they should influence the outcome, the Court determined it was just and equitable that the presumption in r 15.23 of the HCR should not apply. The Court went on then to apply ordinary costs principles and awarded the plaintiffs half of their costs on a category 2B basis up to the point at which EQC paid the sums ultimately accepted as appropriate.
[32]Neither case assists given their very different context.
[33] Additionally, I do not consider that the rule-mandated approach to summary judgment applications, or the approach to split liability and quantum trials, provide much if any assistance on the question of deferring issues of costs.13
Legal principles – contractual rights to indemnity costs
[34] There are established principles in respect of indemnity costs claims under r 14.6(4)(e) of the HCR. Where there is a contractual right to indemnity costs, the question for the Court to ask before making an order is: for the necessary steps, are the costs claimed reasonable in amount?
[35] The Court of Appeal in Black v ASB Bank Limited summarised the legal principles in respect of assessing whether a claim for indemnity costs under a contractual agreement is reasonable:14
(a)what tasks attract a costs indemnity on a proper construction of the contract;
13 Reserving costs until after a quantum trial is permissible but not the only way of dealing with costs
– Cousins & Associates v FM Custodians Limited [2013] NZCA 99 at [16], citing Alan Williams Entertainment Limited v Hurd [2006] EWCA Civ 1637 at [37]–[39].
14 Black v ASB Bank Limited [2012] NZCA 384 at [80].
(b)whether the tasks undertaken were those contemplated in the contract;
(c)whether the steps undertaken were reasonably necessary in pursuance of those tasks;
(d)whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs; and
(e)whether any other principles drawn from the general law of contract would in whole or in part deny the claim and its prima facie right to judgment.
[36] The question of reasonableness is a robust determination.15 Incidental costs fall within the scope of the indemnity costs provisions in the lease. That means that costs will not be limited to those associated only with the taking of formal steps in the proceeding but include pre-commencement costs. I agree with the view expressed in Kkeshav International Limited v Heaton Holdings Limited that the Court is permitted to award pre-commencement costs pursuant to an indemnity costs clause if the clause makes them payable.16 In this respect, a claim for indemnity costs pursuant to an agreement is distinguishable from an indemnity costs claim made under the HCR directly.17
Should costs be fixed now or deferred?
[37] The fact that the proceedings are stayed (save in respect of costs issues) to enable resolution of the remaining issues in other fora does not automatically mean that costs should also be stayed. Even where substantive proceedings remain in this Court, the costs regime in the HCR anticipates and promotes a system of costs
15 At [81].
16 Kkeshav International Limited v Heaton Holdings Limited [2020] NZHC 1801 at [17].
17 Villa Street Holdings Limited v Water Mart Wairarapa (2017) Limited [2020] NZHC 1569 at [14].
allocation along the way. That is, after interlocutory matters are determined, costs awards are generally made.18
[38] New Oak argues that the primary relief in the PLA proceeding was cancellation of the lease and possession, while the rest was subsidiary. Moreover, it was these aspects which underscored the urgency of the matter and informed the time and cost. Moreover, there were offers in September 2024 to split off the issue of cancellation from the money claims which Eco Earth did not accept.
[39] Eco Earth disputes New Oak’s view as to what was the primary relief and contends that New Oak effectively discontinued its money claims and the presumptive obligation on its part to pay costs to Eco Earth is not displaced.
[40] There is no doubt that cancellation and the money claims in this proceeding are interwoven. However, it is also apparent that Eco Earth maintained an entitlement to occupy the leased premises until the last minute and vigorously opposed all the orders sought by New Oak, including cancellation, when that question ought to have been resolved at a much earlier stage.
[41] I accept that the primary orders sought by New Oak in its originating application, seen in context, were cancellation and possession. The consent position reached and orders made reflected the primary remedial outcome sought by New Oak. I regard that as success. I also accept that the PLA proceeding was necessary to get to that position. Therefore, I consider New Oak is entitled to have costs fixed now though the issues in the arbitral proceeding will address the other substantive grounds.
[42] Save for my comments which follow, I also see no reason to depart from that approach merely because the ancillary relief which New Oak sought in this proceeding is by agreement to be determined within the Environment Court and arbitral proceedings. I do not see that this is analogous with discontinuance warranting costs, but if I am wrong on that, I consider the circumstances justify an exception to the general presumption.
18 High Court Rules, r 14.8(1). The exception is in respect of summary judgment applications; r 14.8(3).
[43] In sum, it is not premature to fix costs now even though a merits determination in the arbitration may ultimately accept Eco Earth’s position on the question of validity of the cancellation.
[44] In reaching this view, I have not attempted any consideration of the likely substantive outcome because that is not possible on the affidavit evidence without the benefit of cross-examination. I observe only that the Deed of Lease includes a “no set-off” clause.
Are the costs sought reasonable?
[45] New Oak argues that the dispute was more complex than it needed to be because of Eco Earth’s failure to engage and its egregious breaches of the lease. As earlier indicated, those are matters to be determined at a substantive proceeding rather than engaged with for the purpose of costs determinations. I am however satisfied that cancellation ought to have been resolved earlier than a week prior to an urgently scheduled hearing. The late engagement of legal counsel by Eco Earth does not mitigate that position.
[46] New Oak submits that all the attendance matters set out in the invoices provided to the Court eventually led, and were incidental, to the relevant proceedings:
(a)The February and March invoices are in respect of work “incidental” to enforcement of the landlord’s rights. Those costs relate to:
(i)Eco Earth’s refusal to comply with its obligations unless further compensated; and
(ii)the nuisance caused to neighbours in breach of the lease and which New Oak was eventually required to address.
(b)The May and June invoices involved preparation of PLA notices.
(c)The invoices after June all relate primarily to these proceedings and the need to recover possession of the relevant Site.
[47] New Oak compares the incurred costs with category 2C scale costs for filing an originating application and preparing submissions. According to the HCR, 2C costs for steps within the costs schedule amount to $23,900. The total fees claimed between August and November 2024 (when proceedings were issued to the date of consent orders) are $67,150. New Oak argues that once necessary incidental attendances, including responding to an adjournment application and preparing an application for urgency are also factored in, the relativity between 2C costs and the costs claim is reasonable. I apprehend that this submission is informed by the view that schedule costs were, at least historically, intended to reflect two-thirds of a notional reasonable fee.
[48] New Oak also seeks to front foot potential criticism of the seniority of staff working on the matter. By way of rebuttal, it argued that senior staff’s fee rates are already comparatively low for Auckland, and it transpired it was more efficient to have most of the work done by one special counsel rather than by a partner and a junior. This is a cogent submission. I accept it.
[49] Eco Earth argues that although indemnity costs are not necessarily calculated by reference to the HCR, a comparison of actual costs against 2B costs is a useful exercise. Counsel for Eco Earth calculates 2B scale costs as approximately $13,000 and working with the two-thirds rule of thumb, reasonable actual costs ought to be around $20,000.
[50] The starting point is that I am satisfied that the rates applied by those attending on the file are well within a reasonable range.
[51] I am not persuaded that comparisons with schedule costs provide anything other than one point of reference. The daily rates indicated in the schedule are not necessarily fixed by reference to current market conditions; the time allowances do not necessarily reflect the circumstances of each case; and the inclusion of incidental attendances within the scope of an indemnity clause collectively limit the utility of such comparisons.
[52] I have parsed the invoices rendered, bearing in mind the interrelationship with the Environment Court proceedings. It is at least arguable that the abatement notice
attendances fall outside the scope of incidental attendance and, more appropriately, fall under the rubric of the Environment Court proceedings. Apart from that, I am satisfied that there is nothing indicated which points away from a proper inclusion in a claim to costs. Efforts have been made to remove attendances connected with liquidation steps.
[53] Taking a robust approach, I am satisfied in the exercise of my discretion that it is proper to deduct 20 per cent from the total costs and disbursements claimed of $118,896.26 with the result that $95,117 is owed by way of indemnity costs. Stepping back and considering these costs in the context of a two-day scheduled urgent hearing which was only vacated a week out, I am satisfied that those costs are reasonable. In doing so, I have had regard to the sample of indemnity costs orders made in respect of summary judgment applications set out in Black v ASB Bank Limited,19 noting however that they are not recent. A sample of more recent costs order judgments in that context is footnoted below.20
[54] In sum, I find that Eco Earth is to indemnify New Oak for its actual costs and disbursements reasonably incurred in this proceeding in the sum of $95,117.
Should enforcement of the costs order be stayed pending the outcome of the arbitral proceedings?
[55] The effect of staying an award of costs would be to effectively negative its practical impact. Eco Earth argues that this is appropriate because its ability to continue its claim in arbitration would be at least hampered if the judgment were enforced, resulting in a substantial miscarriage of justice.
[56] There is however no cogent evidence supporting this submission. It may be that it falls away if the arbitral proceedings have been substantially progressed given the passage of time.
19 Black v ASB Bank Limited, above n 13, at [105], citing Agape-Holistic Retreat Corporation Limited v Agape-High Q-Holistic Horsemanship Corporation Limited HC Auckland CIV-2007-404-6917, 7 August 2008; Agape-Holistic Retreat Corporation Limited (in liq) v Agape-High Q-Holistic Horsemanship Corporation Limited HC Auckland CIV-2007-404-6917,
16 September 2010; Fotheringhame v Singh Farms New Zealand Limited HC Auckland CIV-2008-404-2215, 5 November 2008; and Stockco Limited v Denize HC Auckland CIV-2010-404-5668, 15 July 2011.
20 Baba Nyonya Limited v Loh [2024] NZHC 3348; Reforma Limited v Brown [2024] NZHC 1672.
[57] In any event, I am not satisfied that grounds for a stay are made out for essentially the same reasons why costs should be fixed now. Accordingly, I decline to grant a stay.
Costs on costs
[58] In the ordinary course, courts generally do not award costs in respect of costs applications. I consider the situation is different when there is a contractual indemnity where the main argument is about deferring the fixing of costs and/or a stay. Eco Earth claimed costs of $3,585 (in the event of dismissal of New Oak’s application) on a 2B basis. New Oak claims (presumably) indemnity costs of $8,220 in respect of its costs memorandum but has not produced evidence of those costs. There is no evidential basis therefore to make that award of costs. Instead, I make a costs order on a 2B basis only for $3,585 in favour of New Oak.
Result
[59] I make an order for costs and disbursements in favour of New Oak in the sum of:
(a) $95,117; and
(b) $3,585 in respect of the informal application for stay of costs.
............................................................
Walker J
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