Northlake Investments Limited v Exclusive Developments Limited
[2018] NZHC 1264
•31 May 2018
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2017-425-000064 [2018] NZHC 1264
BETWEEN NORTHLAKE INVESTMENTS LIMITED
Plaintiff
AND
EXCLUSIVE DEVELOPMENTS LIMITED
Defendant
Appearances: K J Logan for Defendant (Applicant for costs) M G Colson for Plaintiff (Respondent on costs) Judgment:
31 May 2018
(Determined on the papers)
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on costs
[1] The plaintiff issued this proceeding in order to obtain an order for specific performance of an easement agreement. The plaintiff applied for summary judgment.
[2] The defendant filed opposition to the summary judgment application. (The defendant at the same time filed a statement of defence and counterclaim). A fixture of the summary judgment application was allocated for 5 December 2017 with consented directions for submissions by the parties (on 21 and 28 November 2017 respectively).
[3] On 24 November 2017, the summary judgment hearing was adjourned, on the plaintiff’s application, to 7 March 2018 with the timetable dates for submissions amended to 16 February 2018 and 23 February 2018 respectively.
NORTHLAKE INVESTMENTS LIMITED v EXCLUSIVE DEVELOPMENTS LIMITED [2018] NZHC 1264 [31 May 2018]
[4] On 23 February 2018, the plaintiff filed a memorandum withdrawing its summary judgment application. The memorandum of withdrawal recorded that the plaintiff was “of course” prepared to pay scale 2B costs for the summary judgment application (which Mr Colson calculated to be $1,338, representing Item 23 in Schedule 3, High Court Rules).
[5] The parties were unable to agree on the costs and disbursements and counsel filed submissions.
[6] Before the substantive proceeding became the subject of further case management, the plaintiff on 4 April 2018 filed a notice of discontinuance.
[7] Comprehensive costs submissions have since been filed by counsel both in relation to the substantive proceeding and the interlocutory application.
Defendant’s application for costs
[8] The defendant seeks its costs and disbursements in relation to both the substantive proceeding and the interlocutory application.
[9] For the defendant, Ms Logan submits that a 2B calculation would be appropriate for the substantive proceeding.1
[10]Ms Logan submits that in relation to the summary judgment application:
(a)A 2C calculation would be appropriate for the filing of opposition;2
(b)The defendant’s solicitor/client costs should be awarded for preparation of submissions on the basis that they are less than 50 per cent of a 2C calculation, 50 per cent being appropriate having regard to the late withdrawal of the summary judgment application;
1 High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).
2 High Court Rules, Category 2 under r 14.3(1) and band C under r 14.5(2).
(c)An uplift of 50 per cent above scale calculation for both items would be appropriate as the plaintiff’s claim was unmeritorious.
[11] The defendant also seeks as disbursements the fees and disbursements ($1,125 and $9,057.50 respectively) charged by Leon Hallett and Richard Parnell who provided affidavit evidence.
Plaintiff’s position
[12] After the plaintiff withdrew its summary judgment application but before the plaintiff discontinued the substantive proceeding, the plaintiff made an open offer to the defendant on the costs and disbursements of the summary judgment application as follows:
(a)$4,430 for the opposition (calculated on a 2C basis);
(b)$110.00 disbursement for the filing fee;
(c)Payment of Mr Parnell’s reasonable costs in relation to his affidavit (excluding any fee content for Mr Parnell’s more general engagement). The open offer was not accepted by the defendant. Counsel thereafter engaged in without prejudice discussions concerning costs. (Ms Logan has inappropriately attached to her memorandum a copy of the without prejudice communications, which I ignore).
[13] For the plaintiff, Mr Colson has responded to the defendant’s application with this summarised introduction:
The defendant now seeks excessive costs and unjustifiable disbursements; some of which were contracted for prior to the proceeding being filed. It is inappropriately seeking to shift some of its development costs on to the plaintiff by this costs process. The plaintiff asks that no costs be awarded given what the defendant has put before the Court; or, alternatively, only costs of $4,340 should be awarded …
The incidence of costs – should costs follow the event?
[14]I start with the substantive proceeding itself.
[15] As the plaintiff discontinued this proceeding, the default rule under r 15.23 High Court Rules applies – the plaintiff must pay the defendant’s costs unless the Court orders otherwise. The defendant is not required to demonstrate any unreasonableness on the part of the plaintiff in commencing and then discontinuing the proceeding. The Court will not consider the merits of the respective cases unless they are so obvious that they should influence the costs outcome.3
[16] The defendant’s first ground of opposition and defence was that a number of steps were required to be taken under the easement agreement before the registration of easement instruments (of which specific performance was sought by the plaintiff) could occur. The defendant therefore asserted that until such time as the terms of the easement were determined, any proceeding by the plaintiff was premature. Secondly, the defendant asserted that the easement instrument tended by the plaintiff did not comply with the easement agreement, particularly in relation to the diversion of stormwater over the defendant’s land.
[17] After the plaintiff had issued this proceeding, the parties adopted a joint approach to the Queenstown Lakes District Council (the Council). In particular, the plaintiff lodged resource consent applications with the Council referred issues (including in relation to the terms of the easement instrument and the exact dimensions and location of the easement route) to the Council and its solicitors for a decision.
[18] By a memorandum dated 22 November 2017, Mr Colson (for the plaintiff) sought the adjournment of the hearing of the summary judgment application. He reserved the plaintiff’s right to later argue that it would be entitled already to the orders sought). But he explained that the plaintiff:
… considers that the summary judgment application is best advanced after the terms of the Easement Instrument and the exact dimensions and locations of the easement route had been settled by the Council and the Council’s solicitors in accordance with the agreed contractual dispute resolutions processes.
(It is common ground between counsel that the easement agreement did indeed provide that differences between the parties as to the terms of the easement instrument
3 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973.
and the exact dimensions and location of the easement route were to be determined by the Council or its solicitors).
[19] Counsel informed the Court that the Council subsequently settled the terms of the easement instrument but not the easement route. The plaintiff nevertheless elected to withdraw the summary judgment application and later elected to discontinue the substantive proceeding. Mr Colson records that the plaintiff, had it chosen to do so, could have amended the form of relief it had sought but that it chose not to do so for reasons related to the Council’s primary interest.
[20] There is not a sound reason to depart from the default position under r 15.23. The plaintiff chose to commence this proceeding, including its application for summary judgment, at a time when easement issues between the parties had not been determined. In the light of the express provisions of the easement agreement as to the Council’s role in determining any differences, the proceeding may properly be viewed as having been commenced prematurely. When progress was subsequently achieved by cooperation between the parties, in conjunction with the Council, the summary judgment application was withdrawn and subsequently the plaintiff’s discontinuance was filed.
[21] In these circumstances, r 15.23 is to be applied to the costs of the substantive proceeding.
The incidence of costs – the summary judgment application
[22] For similar reasons as apply to the substantive proceeding, the plaintiff should bear the costs of its withdrawn summary judgment application. Given that the proceeding itself was premature so, too, was the summary judgment application.
The amount of costs
[23] I set out in Schedule A to this judgment my calculation of the costs which I consider just and appropriate in this case. The reasons are as follows:
(a)Statement of defence
The defendant seeks costs on a 2B basis which is appropriate.
(b)Opposition to interlocutory application
The defendant seeks costs in accordance with band C on the basis that a comparatively large amount of time for that step was reasonable.4 I agree. The scope of evidence reasonably adduced by the defendant in opposition was well beyond a normal amount. Such is reinforced by the fact that the plaintiff’s deponent filed in reply an 83 paragraph affidavit supported by 30 pages of exhibits.
(c)Written submissions
The defendant seeks $2,793 by reference to its solicitor’s time recording records in relation to research and the drafting of submissions. This figure is less than half the three days which would be allowed (for Item 24) on a 2C calculation, half being $3,345. Given the issues raised in the evidence of the parties, I would have taken the view that a 50 per cent allowance based on a 2C calculation was reasonable. The principle (under r 14.2(1)(f)) that an award of costs should not exceed the costs incurred by the party claiming costs) dictates that the sum of $2,793 claimed by the defendant (which is GST exclusive) is appropriate.
(d)Memorandum
The defendant claims for one memorandum filed for a case management conference on a 2B calculation. This is appropriate. Mr Colson submitted that the memorandum in part related to the defendant’s counterclaim. That is correct but the defendant still had to prepare and file its memorandum in relation to the plaintiff’s claims. A
4 High Court Rules, r 14.5.
full item allowance is appropriate as the defendant is not doubling up on this item elsewhere.
(e)Uplift?
The defendant seeks an uplift of 50 per cent which Ms Logan submits would bring into account the plaintiff’s conduct in bringing a wholly unmeritorious application. I decline to make an order of increased costs under r 14.6(3). I am not satisfied that it is accurate to describe this proceeding as wholly unmeritorious. The plaintiff will be paying the costs of both the substantive and the interlocutory proceedings because the proceedings can appropriately be viewed as having been commenced prematurely. That involves, on the part of the Court, an assessment as to timing and pre-requisite steps rather than as to the ultimate merits of each party’s position.
Disbursements
[24] I have set out in Schedule B of this judgment the disbursements which I allow. The disbursements are fixed in the sums identified for the following reasons:
(a)Statement of defence and notice of opposition – the allowance of these items is straightforward.
(b)Fees of Mr Hallett – Mr Hallett identified from his three invoices for the period July to September 2017 (totalling $29,208.75 (exclusive of GST)) a sum of $1,125 as relating to the Northlake easement in particular. The plaintiff’s first objection (among others) to Mr Hallett’s fee is that Mr Hallett gave (factual) evidence as the person engaged to manage the design of the subdivision rather than as a person qualifying himself as an expert. The objection is sound. The recovery of disbursements under r 14.12(6) is expressly in relation to “an expert witness”. Mr Hallett did not so qualify himself in the affidavit he provided.
(c)Fees of Mr Parnell – the defendant filed a lengthy affidavit of Mr Parnell who qualified himself as an engineering expert. The defendants sought a disbursement in relation to Mr Parnell’s invoices dated 31 August 2017 and 28 September 2017 (totalling $9,357.50 (exclusive of GST)). When the plaintiff challenged the recoverability of these fees, Mr Parnell provided an affidavit as to the work his fees covered. He explains that the first invoice (for $8,855 (exclusive of GST)) related to the two memorandum annexure to his affidavit. The difficulty with that explanation is that the invoice itself refers to numerous matters which do not appear to relate specifically to the litigation, such as “further updates to Patterson Pitts Design Review for Final Submission following site visit”. There does not appear to have been a rigorous effort to separate out from the invoices those matters which related purely to the affidavit. In earlier costs submissions filed for the defendant, counsel stated that:
We understand from discussions with Mr Parnell that his reports (annexed to his affidavit) were prepared with the Court proceeding in mind.
For counsel to state the nature of instructions in that way makes it evident that the direct instructions were not from the defendant’s lawyers. The uncertainty as to whether all attendances were specific to the conduct of the proceeding5 is reinforced by the concluding paragraph in Mr Parnell’s explanatory affidavit where he states:
My understanding from my discussions with Lee Brown, the Director of Exclusive Developments Ltd, that (sic) sought these reports as a result of the Court proceedings issued by Northlake Investments Ltd.
I am satisfied that significant attendances were required of Mr Parnell in the preparation of his affidavit. I am satisfied that those would have amounted to no less than $2,850 (representing 15 hours of Mr Parnell’s time at his charge-out rate of $190 per hour). Beyond that I am not
5 As required by High Court Rules, r 14.12(2)(b).
satisfied that the attendances covered in the invoices were specific to the conduct of this proceeding.
(d)Exclusion of GST – GST is to be excluded from the disbursements ordered to be paid.6
Outcome
[25] The defendant is entitled to an award of costs and disbursements on the application of the appropriate scale (without an increase).
Disposal of the defendant’s counterclaim
[26] In this judgment, I have not addressed any costs and disbursements associated with the defendant’s counterclaim. Neither party has asked that those be addressed.
[27] It does not appear that the defendant has yet filed a notice of discontinuance on its counterclaim. I anticipate from the lack of a request for timetabling directions relating to the counterclaim that it is the defendant’s intention to discontinue it.
[28] My impression is that the defendant’s statement of defence on the one hand and its counterclaim on the other were essentially two sides of the same coin.
[29] By reason of the conclusions in this judgment, I do not anticipate that the Court would make any further award of costs and disbursements in relation to the counterclaim or the defence to counterclaim. Assuming the defendant intends to file a notice of discontinuance that should be done without delay. The Court looks to counsel to reach agreement on the resolution of the costs of the counterclaim and to incorporate a statement as to that resolution into the notice of discontinuance.
6 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 27 NZTC 22-058 at [17].
Order
[30] I order the plaintiff to pay to the defendant the costs and disbursements of this proceeding which I fix at $12,605.00 and $4,119.56 respectively.
Associate Judge Osborne
Solicitors:
Goldsmith Law, Dunedin
Counsel: M Colson, Barrister, Wellington Gallaway Cook Allan, Dunedin
SCHEDULE A
(Category 2 proceeding)
Item Description Band Days Amount 2 Statement of defence B 2 $4,460.00 23 Opposition to interlocutory application C 2 $4,460.00 24 Written submissions (actual cost) $2,793.00 11 Case management memorandum B 0.4 $892.00 Total Costs $12,605.00
SCHEDULE B
Description
(all excluding GST)
Amount Statement of defence $1,173.91 Notice of opposition $95.65 Expert fees: Richard Parnell $2,850.00 Total Disbursements $4,119.56
0
2
0