North Holdings Development Ltd v WGB Investments Ltd

[2014] NZHC 1175

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3622 [2014] NZHC 1175

BETWEEN

NORTH HOLDINGS DEVELOPMENT

LIMITED AND NORTH HOLDINGS INVESTMENT LIMITED, CATCHLAY INVESTMENTS LIMITED, OMAHANUI HOLDINGS LIMITED, GRD MARKETING LIMITED, PE GA INVESTMENTS LIMITED, SOOK JIN SUSAN LEE, RJA INDUSTRIAL LIMITED, KGH HOLDINGS LIMITED,

MARK JOHN PEVATS, NORMA JOYCE PYLE AND ROGER NOEL PYLE, MARK JOHN PEVATS, NORMA JEAN PYLE AND ROGER NOEL PYLE, DAVID GREGORY CARR AND LYNETTE MAREE DUNCAN, SIX SEVEN LIMITED, HSIU-YEN WANG AND GONG-LIANG JOU

Applicants

AND

WGB INVESTMENTS LIMITED Respondent

Hearing:	On the papers
Counsel:	A E Hansen for Applicants K McDonald for Respondent
Judgment:	30 May 2014

JUDGMENT OF KATZ J (Costs)

This judgment was delivered by me on 30 May 2014 at 3:00 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:           Heimsath Alexander, Auckland

Kevin McDonald & Associates, Auckland

NORTH HOLDINGS DEVELOPMENT LIMITED & ORS v WGB INVESTMENTS LIMITED [2014] NZHC

1175 [30 May 2014]

Introduction

[1]      North Holdings Development Limited (“North Holdings”) is the developer of an industrial/commercial park known as Northgate Park, near Marsden Point, in the Whangarei District.  North Holdings and the other applicants together own all of the lots in Northgate Park, other than the two lots owned by the respondent, WGB Investments Ltd.

[2]      The applicants applied for orders modifying a restrictive land covenant which had been lodged by North Holdings against the titles to the lots in the Northgate Park development.  The need to modify that covenant arose as a result of a zoning change. In particular, Northgate Park was formerly zoned for heavy industrial purposes. It is now zoned for “mixed use” activities.  The covenant, however, reflected the previous zoning.   It required all buildings to “be constructed to a high standard and high quality  in  new  building  materials  in  a  manner  in  keeping  with  a  high  quality industrial estate”.  The main amendment sought by the applicants was to change the words  “industrial  estate”  to  “mixed  use  development”.    This  would  bring  the covenant   into   line   with   the   new   zoning.   WGB   Investments   opposed   that modification.

[3]      By Judgment dated 4 April 20141  I granted the application to modify the covenant.  I held that there were strong grounds in favour of the Court exercising its discretion to modify the covenant.  There would be little or no detriment to WGB Investments in the covenant being modified, as it has secured a certificate of compliance for its current (industrial) plans. Conversely, there would be clear detriment to the applicants in the covenant remaining in its existing form, as they would be unable to develop their properties, as of right.

[4]      I reserved the issue of costs.  The applicants have now filed a memorandum in which they seek an award of 2B scale costs.  The respondent opposes any award

of costs and submits that costs should lie where they fall.

1      North Holdings Development Limited & Anor v WGB Investments Limited [2014] NZHC 670,

4 April 2014.

Should costs be awarded in favour of the applicants?

[5]      The applicants rely on the general costs principles set out in the High Court Rules.   They say that they made numerous efforts to obtain WGB Investments’ agreement to the modification of the covenant prior to the hearing.  Had these offers to resolve the issue been accepted, it would have avoided costs to all parties.  The applicants also assert that WGB Investments’ approach to the litigation unnecessarily increased attendances and delayed the timetable towards hearing.

[6]      WGB Investments, on the other hand, submit that costs should lie where they fall.  In their submission, r 14.7(g) of the High Court Rules, which allows costs to be refused or reduced, applies to cases where an applicant has obtained an order as a result of an indulgence.

[7]      In Holdgate v Holdgate the Court noted that, conventionally, the grant of an indulgence  should  be  made  at  the  expense  of  a  costs  award  against  the  party obtaining the indulgence (in this case, the applicants).2    WGB Investments also

relies on Hunton Limited v Swire,3 where Wilson J considered that the normal course

of costs following the event was not appropriate in these types of cases.  His Honour considered that the plaintiffs had gained a material advantage in obtaining an order which resulted in the loss of a legal right vested in the defendant.  Accordingly, the plaintiffs were ordered to pay the defendant’s costs.4

[8]      A similar approach has  been taken by the Supreme Court of Victoria in Australia in Re Withers, when considering comparable legislation to ss 316 and 317 of the Property Law Act 2007 (which were the relevant provisions in this case).5    In

that case the Court stated that:6

…unless the objections taken are frivolous, an objector in a proper case should not have to bear the bitter burden of his own costs when all he has been doing is seeking to maintain the continuance of a privilege which by law is his.

2      Holdgate v Holdgate HC Auckland CP303/96, 24 September 1996 at [5].

3      Hunton Limited v Swire [1969] NZLR 232 (NZSC).

4      At 236.

5      Re Withers [1970] VR 319.

6      At 320.

[9]      Such principles run contrary to the usual costs principle that the successful party will normally be entitled to an award of costs.  Indeed, applying the principles I have outlined, the unsuccessful party, WGB Investments, is arguably entitled to an award of costs.

[10]     The reason for this reversal of the usual costs principles is simply that, in cases such as this, the applicant is seeking to remove or modify the respondent’s existing contractual rights.  The applicant is seeking an indulgence from the Court. If a  respondent  successfully  opposes  such  an  application  they  will,  of  course,  be entitled to an award of costs.  The converse, however, does not necessarily apply.  A successful applicant will not be entitled, as of right, to their costs.  Indeed in some cases, as I have noted above, an award of costs will be made against a successful applicant.

[11]     The nature of the proceedings must be kept in mind when considering costs issues.   Unlike in ordinary civil litigation, a party who opposes extinguishment or modification of a covenant starts from the position of being “in the right”.   In opposing the application they are seeking to protect their existing legal rights.  For that reason the normal rule that costs follow the event does not apply.  A respondent who  unsuccessfully  opposes  an  application  to  extinguish  or  modify  a  covenant should generally not have to pay the applicant’s costs, unless he or she has acted unreasonably.

[12]   In this case WGB Investments opposed the proposed modification or extinguishment of the covenant on fairly slim (but arguable) grounds, against the backdrop of its acknowledged desire to be “bought out” of the development, which it saw as a “white elephant”.   Although I have some reservations as to WGB Investments’ conduct and motives in resisting the application, I am not prepared to find that it behaved so unreasonably that an award of costs should be made against it.

[13]     On the other hand, this is not an appropriate case in which to award costs against the successful applicants.  Indeed WGB Investments does not seek such an award.  Rather, the appropriate course is for costs to lie where they fall.

Result

[14]     The applicants’ application for costs is dismissed. Costs are to lie where they

fall.

Katz J