No 317 Limited v Canterbury Regional Council
[2013] NZHC 1880
•26 July 2013
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2012-409-2607 [2013] NZHC 1880
BETWEEN NO 317 LIMITED Plaintiff
ANDCANTERBURY REGIONAL COUNCIL Defendant
Hearing: 26 July 2013 (Determined on the papers)
Submissions (in writing) 28 June 2013 and 5 July 2013
Appearances: T C Weston QC and P A Cowey for Plaintiff
M G Colson and K J Dobbs for Defendant
Judgment: 26 July 2013
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to costs
Introduction
[1] This judgment concerns costs on an interlocutory proceeding. The parties seek remarkably different orders.
The plaintiff ’s claim
[2] The plaintiff ’s claim, filed in November 2012, was in relation to two causes of action, namely repudiation of contract and misfeasance in public office.
[3] On 11 February 2013, the defendant’s solicitors wrote to the plaintiff’s solicitors in relation to the two causes of action and security for costs. They stated (summarised):
(a) The plaintiff had sold its business including the contracts which founded the repudiation claim. The plaintiff by its deed of assignment
NO 317 LIMITED v CANTERBURY REGIONAL COUNCIL [2013] NZHC 1880 [26 July 2013]
assigned “all the rights, privileges, liabilities, obligations and interest of [the plaintiff] under the contract”. The plaintiff therefore no longer had any rights in a contractual claim.
(b)The tort of misfeasance claim was grossly under-particularised. As it involves an allegation of reprehensible conduct, counsel for the plaintiff was also subject to r 13.8 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.
(c) Given the plaintiff’s apparent impecuniosity, the defendant required security for costs ($120,000 being the defendant’s solicitors estimate of an award of costs to trial with an appropriate uplift, calculated to be
$131,397, excluding disbursements, then rounded down to $120,000). [4] The plaintiff’s solicitors responded on 14 February 2013. They responded:
(a) The criticism of the first (repudiation of contract) cause of action was rejected.
(b)The requirement for particularisation of the (misfeasance) cause of action was considered to be “difficult to respond to” given the absence of specifically requested particulars.
(c) They considered that no security should be given as the plaintiff’s impecuniosity was linked to the subject matter of the proceeding, but an interested party who was funding the litigation would be prepared to give a “reasonably limited” undertaking.
The interlocutory applications
[5] The defendant filed its interlocutory applications the following day, and sought orders:
(a) That the plaintiff’s claim (that is both causes of action) be struck out.
(b)In the alternative, that summary judgment be entered in favour of the defendant.
(c) That security for costs ($120,000 or otherwise as the Court ordered)
be provided.
[6] The defendant filed a notice and evidence in opposition.
[7] The interlocutory application was allocated a hearing to take place on 7 June
2013 (limited to the strike-out and summary judgment applications), with the defendant’s submissions due on 29 May 2013. Security for costs was to be the subject of further discussion between the parties, but with time available for hearing of that on 12 June 2013 if required.
[8] The defendant filed an affidavit in reply on 16 April 2013. The plaintiff subsequently filed a further affidavit on 5 June 2013.
[9] In the meantime, the plaintiff, approximately two weeks before the hearing of the strike-out and summary judgment applications, filed an amended statement of claim. That amended claim:
(a) Maintained the first (repudiation of contract) cause of action. (b) Introduced a new (repudiation of contract) cause of action.
(c) Removed the misfeasance cause of action.
(d)Introduced a new cause of action based on the torts of intimidation and intentional cause of loss by unlawful means.
The withdrawal of the applications
[10] The defendant then withdrew the strike-out and summary judgment part of its application. The defendant explains that it did so because, although it remains of the view that the contractual causes of action are flawed because of the plaintiff’s
assignment of its rights under the contract, the new economic torts introduced are very fact dependent. The plaintiff saw no point, in terms of efficiency or saving of costs, in continuing the strike-out/summary judgment applications in respect of one set of causes of action only.
Agreement on security for costs
[11] The parties then reached agreement on security for costs. The plaintiff agreed to provide initial security for costs of $50,000, with the defendant’s application for security then adjourned so that the defendant may later pursue a further tranche of security (the plaintiff not accepting that any further security will be appropriate). The parties did not reach agreement on the cost of the security application.
The defendant’s application for costs
[12] Counsel for the defendant describes what happened, through the amended statement of claim, in these terms (I summarise):
(a) The misfeasance cause of action had not been used by the plaintiff as a “spoiling tactic”.1 Rather, the plaintiff had pleaded all material facts and believed that the misfeasance cause of action was justified. On review, after receiving the defendant’s affidavit evidence, the plaintiff saw (not withstanding an overlap between economic duress and misfeasance) that a cause of action in economic duress was a “better
fit”.
Counsel notes that the striking out of the misfeasance cause of action
alone would not have been sufficient to dispose of the plaintiff ’s
original statement of claim as a whole.
1 A term borrowed from the judgment of Associate Judge Bell in Official Assignee v Menzies (No
4) HC Auckland CIV-2009-404-3391, 4 May 2011, at [57], adopted by counsel for the defendant to characterise the plaintiff ’s original pleading.
(b)The defendant had chosen to pursue a strike-out application, rather than issuing a formal notice for further and better particulars.2
(c) The plaintiff should not be criticised for failing to agree to the provision of security for costs in the face of the pending strike-out application, security having been promptly agreed once the strike-out and summary judgment applications were discontinued. Imposition of costs would be inappropriate when that part of the application has been adjourned.
[13] The defendant seeks the following orders:
(a) Indemnity costs on the misfeasance aspect of the application, apportioned as $11,628, with a filing fee of $725, or in the alternative increased costs of $3,426 (calculated as 41% of a 2B award ($4,179 x
0.41 = $1,713, increased by 100% = $3,426)).
(b)Security for costs. The defendant seeks an apportionment of costs on a 2B basis of $896 (calculated as $4,179 x 0.19 = $896).
The plaintiff ’s opposition to costs
[14] Counsel place emphasis upon the defendant’s discontinuance of the strike-out and summary judgment applications, asserting that withdrawal of such applications is akin to discontinuance of a proceeding. That said, the plaintiff submits that the more appropriate course in relation to those applications is that costs lie where they fall.
[15] Counsel submit that costs should similarly lie where they fall on the adjourned security for costs application.
Discussion
[16] I begin with the security for costs application.
2 Counsel relying on the observation of Master Thomson in Whitman v Airways Corporation of
New Zealand Limited (1994) 8 PRNZ 155 at 158.
[17] On my assessment, it is just that the plaintiff pay costs on that application to date.
[18] Through the agreement obtained, the defendant has been successful in obtaining security. The defendant’s solicitors had appropriately requested agreement to security by letter before issuing the application. While counsel for the plaintiff submit that there should be no criticism of the plaintiff for failing to agree security in the face of a pending strike-out application, it remains a fact that security was a live issue. The plaintiff could have responded by reaching an at least provisional agreement. Instead the plaintiff had its solicitors respond by giving reasons as to why no security should be given at all, or alternatively there might be some form of limited undertaking from an interested party.
[19] In the circumstances, the defendant’s application for security was justified. The defendant should have reasonable costs of its application.
[20] The fact that the application for security remains extant and adjourned, so as to enable the defendant to pursue a further tranche of security, does not render an award for costs to date inappropriate. Any costs later incurred will be dealt with later. Pursuant to r 14.8(2) the current order I now make will be capable of later variation if appropriate, but the making of an order fulfils the primary rule under r 14.8(1), that the costs of an opposed interlocutory application be fixed now in the absence of special reasons.
[21] The defendant’s approach to apportionment of scale costs is a reasonable one, as is the figure of $896 arrived at.
[22] I now turn to the strike-out and summary judgment applications.
[23] The costs of those applications should be dealt with now, as they are both at an end.
[24] In my judgment, the just order is that there be no award costs in relation to those applications. Following the amendment of the plaintiff’s claim, the defendant
has understandably formed the view that there was no point, in terms of efficiency or cost saving, in continuing the applications in relation to the contractual causes of action when the economic torts now pleaded are so fact dependent, and therefore not amenable to strike-out. Given that decision, the fact that the bringing of the application has led to a withdrawal of the misfeasance cause of action (in favour of newly pleaded tortious claims) is of much less significance. There have been repeated judicial observations as to the desirability of a preference for strike-out applications where there is a likelihood of final disposition of the proceeding.
[25] I accept, as submitted by counsel for the defendant, that there is a distinction to be drawn between the new causes of action in tort and the cause of action (in misfeasance) no longer pursued. The defendant’s communicated concerns as to the cause of action in misfeasance from the outset substantially related to a lack of pleading of material elements of the tort, and a belief on the part of the defendant that the plaintiff would be unable to sustain any such allegation. This is not a proceeding in which a plaintiff has essentially tidied up its pleadings in relation to existing causes of action. The Court is entitled to infer that the plaintiff, by abandoning at least for the time being the misfeasance cause of action, recognises that there is a fundamental difficulty with that pleading. If the plaintiff had chosen to seek to properly particularise the misfeasance cause of action, it may well be that the defendant’s strike-out application would have proceeded to hearing with reasonable prospects of success.
[26] In the event, a just costs resolution is that costs lie where they fall in relation to that application.
Orders
[27] I order:
(a) The plaintiff is to pay to the defendant in any event the costs of the defendant’s application for security for costs, to the extent that it has been resolved to date, and I fix those costs in the sum of $896, together with a disbursement of $725.
(b) There is no order as to the costs of the applications for strike-out and
summary judgment.
Associate Judge Osborne
Solicitors:
Parry Field, Christchurch
Bell Gully, Wellington
T C Weston QC, Christchurch
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