Norfolk Trustee Company Limited v Tattersfield Securities Limited HC Auckland CIV 2004-404-3668
[2005] NZHC 1638
•30 March 2005
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2004-404-3668
BETWEENNORFOLK TRUSTEE COMPANY LIMITED
First Appellant
ANDPORTLAND TRUSTEE COMPANY LIMITED AND PORTLAND INVESTMENT TRUSTEE COMPANY LIMITED
Second Appellant
ANDTATTERSFIELD SECURITIES LIMITED AND STEPHANIE ANNE TATTERSFIELD
First Respondent
AND ENTERPRISE PROPERTIES LIMITED
Second Respondent
Hearing: 30 November 2004 & 1 December 2004 Appearances: R P Thomas for the appellant
S C Price for the first respondent
M S Cole and H H Ifwerson for the second respondent Judgment: 30 March 2005
RESERVED JUDGMENT OF PRIESTLEY J
Counsel:
R P Thomas, P O Box 3338, Shortland Street, Auckland S C Price, Bell Gully, P O Box 4199, Auckland
M S Cole/ H H Ifwersen , Simpson Grierson, Private Bag 92518
Copy to:
Stainton & Chellew, P O Box 898, Shortland Street, Auckland
NORFOLK TRUSTEE V TATTERSFIELD HC AK CIV 2004-404-3668 [30 March 2005]
Introduction
[1] The parties are all owners of commercial properties in Queen Street, the heart of Auckland’s Central Business District.
[2] The appellants’ property is adjoined by the first respondent’s property on the south side and the second respondent’s property on the north side.
[3] The appellants, linked developers, obtained the necessary consents to construct a 16 storey apartment building on their site, the contract price being in the vicinity of $9.2 million. The appellants’ site was small, being only 307 m2.
[4] The first respondent’s property is an old three story historic building constructed in 1884. It is tenanted. The second respondent owns a 10 storey building, being mainly a hotel but also comprising retail outlets.
[5] The demolition of the then existing building on the appellants’ site brought with it the attendant problems of noise and access. Party walls and the constraints of the small site compounded those difficulties. Relations between the parties became somewhat fraught.
[6] It became apparent to the appellants the small size of the site, coupled with the proposed height of the building, would necessitate the use of a crane. Such cranes have been a constant feature on the skylines of New Zealand cities for the last forty years. To do its job, and depending on the physical constraints of a site, a building crane will frequently need to swing over adjoining properties, thus trespassing into their air space. Such was the case here.
[7] Very rarely have courts been involved in air space trespass issues. Given the frequency with which this problem occurs in urban areas, it seems probable that the property owners involved negotiate commercial arrangements whereby a licence to use the air space of an adjoining owner is granted in return for an acceptable sum of money.
[8] In the absence of such an arrangement a property owner who wishes to swing a building crane over adjoining land has only two options. He or she can deliberately trespass into the air space and wear the consequences if the adjoining owner seeks legal remedies. Or an appropriate order can be obtained under s 128 of the Property Law Act 1952.
[9]That provision provides:
128 District Court may authorise entry for erecting or repairing buildings, etc.
(1) The owner of any land may at any time apply to a [District Court] for an order authorising him, or any person authorised by him in writing in that behalf, to enter upon any adjoining land for the purpose of erecting, repairing, adding to, or painting the whole or any part of any building, wall, fence, or other structure on the applicant’s land, and to do on the land so entered upon such things as may reasonably be considered necessary for any such purpose as aforesaid.
(2) On any such application the Court may make such order as it thinks fit. Any such order, or any provision thereof, may be made upon and subject to such terms and conditions as the Court thinks fit.
(3) Every application under this section shall be made by originating application in accordance with the rules of procedure for the time being in force under [the District Courts Act 1947]. The Court, for the purposes of hearing and determining the application, shall have all the powers vested in it in its ordinary civil jurisdiction.
(4) For the purposes of this section, the term owner, in relation to any land, means any person registered under the Land Transfer Act 1952 as the proprietor of an estate in fee simple in the land or as lessee or mortgagee of the land, or any person who is for the time being entitled to receive the rent of the land, whether on his own account or as agent or trustee for or mortgagee of any other person, or who would be entitled so to receive the rent if the land were let, or any tenant of the land bound by any express or implied covenant to keep any building thereon in repair.
[10] Such was the position here. The appellants applied for an order relating to its proposed building crane on 6 November 2003 in the Auckland District Court. A consent order was made on 25 February 2004.
The Appeal
[11] The consent order was not a foregone conclusion. The appellants’ s 128 application was opposed. A defended hearing began before Gittos DCJ on 5 February 2004. It was adjourned part heard, to resume on 25 February. On that date the consent order was made but the issue of costs was expressly reserved.
[12] Costs were argued before the Judge. In a reserved decision dated 22 June 2004 he awarded full indemnity costs, on a solicitor/client basis, to the first respondent totalling $62,414.11.
[13] The second respondent’s solicitor/client costs came to a much larger sum. Costs for the solicitor and counsel who conducted the hearing amounted to $84,309. Additionally the costs of a barrister who had advised the second repsondent at an earlier stage were said to be $33,618.91. So far as the second respondent’s costs were concerned these were fixed by the Judge at $62,500.
[14] The appellants too sought costs for the District Court hearing. As is apparent from the above awards this claim was unsuccessful.
[15] Thus, in respect of a s 128 application occupying one full day, resolved by a consent order incorporating various carefully thought out conditions, and permitting the appellants to use a building crane encroaching into the respondents’ air space, the appellants were ordered to pay a total costs award of $124,914.11.
[16] In a subsequent minute dated 16 July 2004 the Judge was invited to enter judgment for costs in the first respondent’s favour for the lesser figure of $55,492.21 to reflect the fact that the first respondent, who was able to recover GST, would otherwise be overpaid its actual outlay. The first respondent very fairly raised this issue with the Judge. No such reduction was sought by the second respondent who had not recovered its full costs outlay and who opposed the appellants’ suggestion in that regard.
[17] The appellants challenge Gittos DCJ’s costs awards in this appeal. They claim the amounts awarded were excessive and based on erroneous principles. Far from being obliged to pay costs to the respondents, the appellants contend the respondents should pay them appropriate costs, being either full indemnity costs or, failing that, costs on the appropriate scale.
[18] The second respondent for its part has cross-appealed seeking full indemnity costs although at the hearing before me this was not pursued with any marked vigour.
District Court Judgment
[19] The Judge was referred to much relevant material. The same material was incorporated into counsels’ submissions before me. Included are “open” letters, purported Calderbank offers, extensive affidavit material relating to past discord between the parties and negotiations, both before and after the filing of the s 128 application. Twenty-five affidavits in total were filed at the District Court.
[20] Particularly because this appeal involves the scrutiny of what is essentially the exercise of a judicial discretion, I set out the factors which weighed with the Judge and the route whereby he reached his decision.
[5] The applicant sought from both respondents permission to swing the boom of the crane across the boundaries of their properties into the respondents’ air space above their buildings. The respondents were not prepared to give permission otherwise than upon conditions which properly protected their property and business rights and the safety of the occupants of their buildings.
[6] After some inconclusive negotiations, the applicant filed this application seeking an order under s 128 authorising the applicant to enter into the air space of the respondents’ respective properties “for the sole purpose of erecting a building on land presently owned by the first applicant situated at 62 Queen Street and located between the first respondent’s land and the second respondent’s land”.
[7] Both respondents filed notices of opposition. Numerous affidavits, some lengthy, were filed by all parties and the matter proceeded to hearing on 5 February. In the course of the hearing it became evident that there were still some issues which required further investigation and evidence and the matter was adjourned part heard for those outstanding issues to be explored.
[8] Following further negotiations during the adjournment the parties were able to agree upon the terms of an order to be made by consent and containing comprehensive conditions for the protection of the respondents’ interests. That order was formally made at the resumed hearing on 25 February.
…
[16] The applicant’s case, at least initially was presented on the basis that once an order for access was granted, the Court had no jurisdiction, or alternatively if it had jurisdiction ought not exercise jurisdiction, to impose conditions other than those which would be imposed by the local government and state authorities having statutory responsibility for the regulation and control of building and construction work.
[17] The order, as finally agreed, indicates an abandonment of that stance and recognition that particular conditions tailored to the requirements of this situation are appropriate.
…
[19] In my view the words “to do on the land so entered upon such things as may reasonably be considered necessary for any such purpose”, and the provision for the imposition of conditions set out in subs (2) together indicate that an applicant approaching the Court for such an order ought to seek to define with clarity the nature and extent of the activities he claims to be reasonably necessary. If the scope of the proposed intrusion is not so defined, the Court cannot adequately assess whether what is sought is in fact reasonably necessary, nor can it adequately consider what conditions, if any, should be imposed.
[20] It should not be left to the vigilance of the neighbouring landowner to research the matter, prudent as it may be for him to do so.
[21] S 128(2) gives the Court the power to make conditions appropriate to the exercise of any right of access it sees fit to grant. Given the terms of the consent order it is plain that all parties accept that a proper focus for such conditions is to seek to protect the adjoining owner against the prospect of damage or nuisance being caused in the exercise of the access sought, so far as it is practicable to do so.
[22] The argument before me was all about defining the scope of the necessary intrusion, and setting proper conditions to limit so far as reasonably possible its adverse impacts upon the respondents.
…
[25] The application was made because the applicant sought an indulgence. That the proceedings were to some extent prosecuted in circumstances of urgency was again necessary only in order to meet the applicant’s economic imperatives. The situation was thus forced upon the respondents who were obliged to take proper steps with urgency to protect their position. That the steps they took were both necessary and efficacious is borne out by the fact that the terms of the consent order largely implement the recommendations of the respondents’ expert witness Mr Clayton.
[26] Overall, it appears to me that the respondents have acted reasonably. They stand to gain no benefit from the applicant’s proposed development but inevitably must suffer some inconvenience from it. They have been put in the position of being obliged to take steps to protect their interests in relation to what the applicant wants to do. In my view their response has been responsible and appropriate and it is proper the applicant should pay their reasonable costs.
…
[31] In my view this is the sort of case where the respondents ought not to be left out of pocket and their reasonable costs ought to be met. I am, however, uncomfortable at the disparity between the costs contended for by the two respondents, particularly when they relate to the solicitor and client costs disclosed by the applicant.
Discussion
[21] I intend no disrespect to counsel by not detailing in full their helpful submissions. The appeal was ably and extensively argued. Indeed counsels’ submissions, the agreed bundle, the chronology, and authorities stack to an approximate height of 24 cms. In my judgment the outcome of this appeal revolves around some salient points to which I now turn.
[22] The first point is that, in a general sense, an award of costs is a discretionary exercise. As with other discretions an appellate court will rarely interfere with the exercise of a discretion unless it can be demonstrated that it has been exercised on principles which are demonstrably wrong, by overlooking relevant matters, or by considering irrelevant matters. As a subset of a discretionary exercise the authorities make it plain that rarely will costs awards be interfered with. (Lewis v Cotton [2001] 2 NZLR 21; Wilson and Horton Ltd v Attorney General [1997] 2 NZLR 513; Glaister v Amalgamated Dairies Limited [2004] 2 NZLR 605).
[23] That said, it is clearly the policy lying behind both the High Court Rules and District Court Rules that there should be a high degree of certainty and predictability about costs awards. Generally, costs will follow the event. Specific bands, scales, and items enable costs to be calculated with a degree of arithmetical precision. Rule 46 of the High Court Rules certainly preserves an over-riding discretion. In both jurisdictions, however, the prescribed scales will be the norm.
[24] In Fitzroy Engineering Group Limited v Technix Group Limited (CIV 2003- 443-293 New Plymouth 23 January 2004 Chambers J) it was said:
[52] Judge Perkins, of course, had to fix costs in light of the currently enacted costs regime, and I must assess his decision against the same framework. The decision does not, with respect, conform with the principles of that framework. Judge Perkins determined that FEGL should meet 75% of Technix’s actual costs. It has never been a feature of the District Court costs regime that the guiding principle is that the winning party should recover a percentage (within a judicially defined band) of its actual costs. The current rules, of which the scale is a central feature, give no hint that that is an underlying principle. The concept of a regime based on recovery (whether full or partial) of actual costs was expressly scotched by the Rules Committee when it deliberated on the new High Court costs rules. There are numerous reasons for that rejection:
a) The courts, in the absence of a taxing regime, are not in a position to assess the reasonableness of a party’s actual legal fees. Taxing has never been popular in New Zealand. The present case is a splendid example of the difficulties of assessing reasonableness. Mr Matheson complained to Judge Perkins and complains now that he has never been shown Technix’s solicitors’ invoices. What work was covered by them? What hourly rate was applied? Notwithstanding the lack of such information, Judge Perkins apparently considered that ’the total fees charged ... do not appear ... to be excessive’. With respect, I cannot understand how any judge could reach an informed decision on the reasonableness of the fees, with no information other than the documents appearing on the court file.
b) A fundamental principle of any costs regime should be predictability, consistency, and expedition: see High Court Rules, r 47(g). Using a party’s actual costs as the starting point fails this principle. It is extremely unpredictable: a party has no means of knowing what costs its opponent is incurring and absolutely no control over them. It leads to inconsistency: some judges (rightly) use as the starting point the prescribed scale, while others adopt the winning party’s actual costs as the starting point. Still others use a mixture. The end result is inconsistent and unacceptably judge- dependent. Increasing the unpredictability still further is the choice of percentage - should the winning party recover 40%, 50%, 67%, or 75%?
c) There is no reason why the losing party should contribute towards its opponent’s choice of high-priced counsel or second counsel or Rolls Royce treatment, unless the nature of the case demanded such expensive legal assistance. That is not to say that a party should not have senior counsel or second counsel if it wants them. But that is a different question from whether it is reasonable to expect one’s opponent to pay for them. In other words, a party’s actual costs may be perfectly reasonable as between it and its lawyers, but expecting an opponent to pay 50%, 67%, or 75% of them - whatever percentage is plucked out of the hat - may be quite unreasonable.
[53] Pending reform of the District Court costs regime, which is likely to happen later this year, I decline to lay down any firm guidelines for that court apart from the following, all of which are obvious:
a) The starting point should always be the scale and only if it leads to an unreasonable result should it be modified in order to do justice between the parties.
b) If the court decides to consider actual costs, they should be no more than a factor in the overall assessment. The court - and the losing party - will need to be given invoices and the costs-claiming party will need to explain how the fees have been calculated. The court will need to assess, not whether the fees were reasonable vis-a- vis the client liable to pay them, but rather what is reasonable in the circumstances to expect the losing party to contribute towards them.
c) Pending reform, at least with major cases where the court considers a departure from scale appropriate, it would always be wise to look at what the likely costs result would have been in the High Court had the case been litigated there. It would be a rare case where the winning party should recover a higher award than it would have done in the High Court. A cross-check with the High Court position is appropriate because there is no authority to support the proposition that costs awarded in the District Court should be higher than what the High Court would have awarded in a comparable case.
[25] I endorse Chambers J’s clear articulation of policy and in particular his admonition that, pending reform of the District Court Rules, the quantum of High Court costs is a useful check.
[26] The next salient point is whether it was an appropriate exercise of the Judge’s discretion to award indemnity costs, which the first respondent received and which undoubtedly the second respondent might have achieved had its costs been at the same level as that charged by the solicitors and counsel representing the other parties.
[27]Rule 48C(4)(a) of the High Court Rules provides:
(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;
There is nothing comparable in the District Court Rules 1992, although Rule 47C does confer a discretion in r 47C(4)(f) to award indemnity costs.
[28] It is clear on the authorities that indemnity costs may be available if a party persists with proceedings to secure some improper or collateral advantage (Hawkins Construction Limited v Chan (2002) 20 NZTC 17, 669). Also, on the authority of Thomas J in H & W Wallace Limited v Lehrke (1993) 7 PRNZ 110, costs close to indemnity costs (in that case $35,000 on solicitor/client costs of just over $46,500) may be awarded in egregious circumstances. Thomas J had before him a case where in his judgment liability should not have been put at issue, the defendant had been inappropriately aggressive in challenging at trial, the plaintiff had wasted costs preparing for matters admitted at the last minute, and the defendant had been unrealistic on settlement issues thus being substantially responsible for the claim proceeding to trial.
[29] Although, as is apparent from the Judge’s findings, the appellants’ conduct of this litigation cannot be immune from criticism, it certainly has not approached the threshold of the defendant Lehrke or Rule 48C(4)(a).
[30] The third point is whether the respondents were entitled to “compensation” and whether their claims for some form of monetary compensation prior to proceedings being issued, were improper and should sound in costs.
[31] Both counsel have referred to a dictum in my decision De Richaumont Investment Co Ltd v OTW Advertising Ltd [2001] 2 NZLR 831:
[19] The District Court Judge declined to fix any monetary compensation payable by the respondent to the appellant and correctly observed that s. 128 conferred no such jurisdiction. The learned judge reserved leave to apply but only where the terms and conditions he had “devised” were unworkable or insufficient or if there was a substantial change of circumstances. The appellant was ordered to pay costs in the sum of $1,200 plus fixed disbursements.
[32] Mr Thomas to some extent, both before and after the s 128 application was filed has seized on this dictum as authority for the proposition that lump sum compensation or a solatium is impermissible in the context of a s 128 application.
[33] Correspondence flowing between the parties before (and to a lesser extent after) the proceeding was issued make it abundantly clear specific monetary sums were being both sought and offered.
[34] Mr Price in his submissions observed that a s 128 sat in Part IX of the Act which empowered the Court to grant discretionary relief in cases of encroachment, tree trimming, mistaken boundaries, and landlocked land.
[35] Other sections in Part IX contain provisions comparable to s 128(2). It would certainly be wrong to construe my dictum as a bald statement to the effect that monetary compensation is not available under ss 2. Indeed in Jacobsen Holdings Limited v Drexel [1986] 1 NZLR 324, the Court of Appeal has expressly turned its mind to an obvious compensatory formula in an analogous Part IX provision.
[36] The word “compensation” as I used it in De Richaumont Investment Co Ltd v OTW Advertising Ltd (supra) was a mere précis of a passage in the court below referring to “monetary recompense and licence fees”.
[37] Clearly if an order under s 128 required remedial work to be carried out on adjoining land after entry, or there was some temporary or permanent diminution to the value of a property or its income, then compensation could appropriately be awarded under ss 2.
[38] Mr Thomas is on stronger ground if by “compensation” he means something akin to a licence fee. As I have mentioned (supra para [7]) in situations where a developer is negotiating for the right to trespass into the air space of an adjoining owner, a monetary sum will invariably be paid. But clearly, in the absence of any material damage, a trespass into an adjoining owner’s air space would not justify any significant compensatory damages figure. Exemplary damages to punish flagrant disregard, however, would be a different issue.
[39] Mr Thomas also laid heavy emphasis on the fact that in the early evening of 4 February 2004, the day before the hearing, the respondents faxed to him a proposal that was totally silent on the issue of any compensation, accepted that s 128 was
applicable, and concentrated solely on the conditions on which access by the crane to the respondents’ air space could be granted. This proposal also sought a contribution of $60,000 “as a reasonable contribution towards legal fees” of the respondents plus disbursements.
[40] The next point is the use by the judge in paragraph 25 of his decision (supra) of the word “indulgence”. It is not apparent from the face of the decision whether the Judge regarded a s 128 application as being an indulgence per se or whether he was referring to the urgency of the proceedings driven by the appellants’ “economic imperatives”, an undoubted reference to the need to construct the building within a given time frame.
[41] However, the Judge’s perception that the application was an indulgence, coupled with his view (para [31]) that this was “the sort of case” where the respondents should not be “left out of pocket”, were determinative of him ordering the appellants to meet the respondents’ reasonable costs.
[42] Mr Thomas is correct when he submits that the appellants were absolutely entitled to apply for a favourable exercise of the s 128 discretion and that there was a clear jurisdictional basis for the order sought to be made.
[43] It does not, however, follow that, by using the word “indulgence” the Judge has misdirected himself. Nor does it follow, that because the appellants obtained the relief they sought it is necessarily entitled to costs.
[44] The word “indulgence” and a pattern of requiring a successful party to contribute to the costs of opposing parties are both discernible under Part IX. A litigant who successfully obtains a boundary adjustment for an encroachment, or access to landlocked land, or an order topping trees, cannot normally expect to obtain costs against a land owner whose property rights have been abridged by a court order. Indeed, frequently a contribution towards the costs of that land owner would be appropriate. Obviously the history behind the application, the respective conduct of the parties, and the way in which the proceeding has progressed will be relevant factors.
[45] The Court of Appeal has recognised this dimension in Wentworth v Sayes (1994) 2 NZ ConvC 191, 859 as did Robertson J whose decision was unsuccessfully appealed. (Sayes & Others v Wentworth & Others (M1817/90 Auckland 12 November 1993).
[46]Dealing with the general issue of costs the Court of Appeal said this:
[It was said] that the Judge had misdirected himself in starting from the premise that as the Sayes were seeking relief under s 129B they should be responsible for the costs of litigation in much the same way as persons who succeeded in obtaining other kinds of indulgence from the Court. [Counsel] referred us to a number of cases under s 129, in none of which had the Court taken such an approach, but there were significant differences in many of them and in others costs had been reserved or no orders made. We do not think any useful conclusion can be drawn from such a comparison. What the Judge said was –
“On an application of this sort the starting point must be that the responsibility for litigation and the costs which are incurred should lie with the plaintiff who are seeking the Court’s indulgence to overcome a legal problem….”
We think he overstated the position in the first sentence of this passage. However, the appellants relied on the apparent legal and factual situation in good faith and were unexpectedly faced years later with the prospect of significant detriment to their properties. This can be taken into account as a substantial factor in the award of costs, justifying a departure from the normal rule that they follow the event….We are not persuaded [the Judge’s] mistake in generalising about the approach to costs in the s 129B applications has produced a result departing sufficiently from the costs that could be awarded on a proper approach as to require this Court’s interference. [per Casey J]
[47] Thus, although the Judge made no reference to Part IX cases and the various authorities to which I have referred, his use of the words “indulgence” is not an error. It does not, however, follow that the type of relief sought under s 128 or indeed under any Part IX provision will necessarily lead, because of an indulgence, to a total obligation on a successful applicant meeting the other parties’ costs.
[48] The final point is that raised by the policy underlying Rule 51 of the High Court Rules which provides:
51 Where defendants defend separately
Where several defendants defend a proceeding separately and it appears to the Court that they, or some of them, might have joined in their defence, the Court shall not allow more than one set of costs to the defendants who might have so joined unless it appears to the Court that there is good reason for allowing more than one set of costs to those defendants
Rule 49 of the District Court Rules 1992 is cast in virtually identical terms.
[49]McGechan on Procedure states simply that:
The aim of the Rule is to minimise costs.
As a matter of interpretation the Rule does not go so far as to prohibit a court from awarding costs in favour of two defendants. Rather the prohibition is against ordering more than one set of costs in favour of defendants who “might have joined in their defence”.
[50] Rule 50 imposes on all parties (prior to 1 January 2000 the Rule was limited to multiple defendants) a joint and several liability to pay costs unless the Court otherwise directs.
[51] Underlying both Rules I discern a policy requiring courts to exercise some caution before awarding costs, without more, in favour of multiple parties, particularly when there is some overlap or community of interest in the litigation position of those parties. This is not a policy (possibly because he was not referred to the Rule) which the Judge appears to have weighed when awarding costs.
[52] There is little authority to assist me in this area. Counsel referred me to Purebred Jersey Breed Society(NZ) Inc. v Jersey Breeders Association Inc (CP17/96 Hamilton 21 August 1997 Penlington J) That case involved claims under the Fair Trading Act and Commerce Act 1986 where the plaintiff failed against two defendants. Rule 51 was raised by the plaintiff. His Honour, however, found that the plaintiff had made out separate cases against both defendants. The then operative scale of costs was regarded as being “hopelessly out of date”. His Honour said:
“If a plaintiff chooses to attack more than one defendant, then that plaintiff must be taken to know that it runs a risk of an award of costs against it in
respect of each defendant against whom it falls. Had the plaintiff succeeded against both defendants I think that it is highly likely that it would have sought not one but two sets of costs. [ p 14]
[53] I accept the submissions of counsel for the respondents that two separate property owners were involved. Their premises were discrete and adjoined the appellants’ land in different aspects. Nonetheless the relief sought by the appellants against both respondents was identical. The consent order impacted on them both in an identical way. It is also undisputed that they both relied (and productively so) on the advice and evidence of the same expert in formulating the various conditions which were embodied in the consent orders.
[54] I do not consider that the circumstances of this case brought into play in its full force Rule 51. However the factors I have outlined in the previous paragraph, given the policy of Rules 50 and 51, are relevant to the exercise of the discretion. The Judge did not consider them, undoubtedly because of the broad view he took that reasonable indemnity costs should be awarded to the respondents in any event.
Decision
[55] In my judgment it is unrealistic for the appellants to expect an award of costs in their favour, let alone full indemnity costs.
[56] As is clear from the correspondence before the District Court, to which I have in part referred, the appellants had no option but to negotiate with the respondents. Although all parties are commercial entities controlling valuable assets, they are nonetheless neighbours. The constraints which a small site imposed on the appellants are counter-balanced by the fact that they wished to proceed with a substantial commercial development involving both demolition and construction over a lengthy period, which would inevitably have adverse environmental consequences for the respondents.
[57] In my judgment no criticism can be attached to any of the parties for endeavouring to negotiate a commercial settlement of the appellants’ need to utilise the respondents’ air space. The various sums proposed at various stages, regardless
of nomenclature, were legitimate mechanisms to find a solution to the appellants’ requirements. Doubtless the respondents’ frames of mind were not improved by various difficulties which had emerged during the demolition phase on the appellants’ site. Doubtless too the respondents did not discern any commercial or financial advantage accruing to them from the apartment block the appellants would construct. The appellants’ perception of urgency and its probably justifiable need to push things along would have aggravated matters on the respondents’ side.
[58] In the normal course of events, and in the absence of any unreasonable conduct or litigation stance on the part of an adjoining landowner, some modest contribution towards a consenting party’s reasonable legal costs might be expected. There is a discernible pattern of such contributions in Part IX cases although, as the Court of Appeal points out, an award is not necessarily the starting point. But importantly on the authorities, is it not the rule that indemnity costs should be awarded.
[59] I do not consider the appellants can be criticised for making a s 128 application. Where criticism can justifiably attach, however, is the appellants’ failure to spell out an earlier stage what s 128(2) conditions might be appropriate. It was not, in my judgment, sufficient for the appellants to state they would abide by all consents, bylaws, and relevant safety and other regulations applying to the use of cranes. The respondents had legitimate and specific concerns on safety and use which needed at least to be considered and addressed.
[60] Such matters too as the extent to which the crane would intrude into the respondents’ air space and the positioning of the crane on the appellants’ site were relevant.
[61] The day before the hearing the respondents forwarded, as an attachment to their offer, a draft order which, so far as its format was concerned (but not in as great detail) was similar to the comprehensive orders (including ss 2 conditions) which were made three weeks later by consent.
[62] The Judge, who had read the file with care and who presided over the one day hearing, was of the clear view the appellants, who was seeking a s 128 order, should have attempted to define with some clarity the nature and extent of what was required rather than to leave that aspect to the respondents. He spells this out in paragraphs 19, 20 and 25 of his judgment (supra). I am not persuaded that the Judge’s perception is wrong. He is fully entitled to weigh those factors in the discretionary exercise.
[63] In declining to award costs to the appellants and in considering the factors to which I have just referred, I consider the Judge was correct.
[64] In my judgment, however, he has erred in the exercise of his discretion and on the face of his judgment in the following ways:
(a) By assuming (possibly because he regarded the application as seeking an indulgence) that it was proper for the appellants to pay the respondents’ reasonable costs.
(b) By assessing those reasonable costs, so far as the first respondent was concerned on a full indemnity basis.
(c) By failing to assess, at least on a comparative basis, what figures might have been awarded on an appropriate High Court scale.
(d) By failing to reflect elements of overlap and double counting which might have resulted from the joint approach taken the respondents, such factors being closely allied to the policy underlying Rules 50 and 51.
[65] Were costs being awarded in favour of a party in the High Court on the 2B scale, the District Court phase would result in an award of $16,530. If Category 2, Band C was involved, an award of $29,580 would follow. (I am allowing items 2, 4.10, 4.11, 4.17, 7.3, 7.4, 8 and 9 of Schedule 2, on a 1.5 day hearing basis.)
[66] If, to reflect the significance of the issues to a party arising out of the fact that a valuable commercial site was involved in respect of which there may be some degree of hazard, costs were to be awarded on the higher 3B scale the sum involved would be $24,510. 3C costs would come to $43,860. I doubt if 3C can be justified across the board.
[67] The reality of the District Court litigation from the respondents’ stand point is they were forced to go to Court because, through no fault of anybody’s, they were unable to conclude a successful settlement. With the advantage of hindsight some of the appellants’ offers now look attractive. The respondents were also obliged by the appellants’ litigation stance to assume, and successfully so, most of the responsibility for the terms of the consent order that was made and in particular the conditions relating to the operation of the building crane.
[68] The errors to which I have referred (supra para [64]) and also a balancing of the various factors or issues outlined in the previous section of my judgment lead inevitably to the conclusion the Judge’s costs awards cannot stand.
[69] I agree with the Judge that the appellants are not entitled to costs. I also agree that a costs award in the respondents’ favour should reflect the way the appellants ran their case in the District Court and the valuable contribution made to the final result by the respondents’ expert. I accept that a costs award should in part reflect the fact that the site development, which led the appellants to seek a s 128 order, was of no benefit to the respondents whatsoever.
[70] I cannot allow a costs award on a full solicitor/client basis as achieved by the first respondent or an award of a similar magnitude in favour of the second respondent. A final award should reflect to an appropriate degree the community of interest shared by each respondent and should also be set at a level which is not wildly out of line with a comparable award which might be made in the High Court on an appropriate scale.
[71] Weighing those matters as best I can I consider that a costs award in favour of the first respondent of $25,000 plus disbursements of $1743.42 and a costs award
in favour of the second respondent of $27,500 inclusive of disbursements is appropriate. Since these figures equate to a 3B award (in respect of which some items may have been inadvertently omitted in my calculation) and are not discounted to reflect Rule 51, I regard the figures as being generous to the respondents.
Result
[72] Cost orders made by Gittos DCJ in the District Court on 23 June 2004 and modified by the Judge’s 16 July 2004 minute are quashed.
[73]The second respondents’ cross appeal is dismissed.
[74]The appellants are ordered to pay costs to the first respondent in the sum of
$25,000 plus disbursements of $1,743.42. The appellants are ordered to pay costs to the second respondent in the sum of $27,500 inclusive of disbursements. Both sums are GST inclusive.
Costs
[75] Costs are reserved. In the event of counsel being unable to resolve costs I am prepared to fix appropriate costs on the basis of memoranda without need for appearances. If a decision from the Court is needed in this area the appellants are directed to file a memorandum within 28 days and the respondents within 14 days thereafter.
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Priestley J
Delivered at 4.30 pm on the 30th day of March 2005
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