Northwest Developments Limited v Zhang
[2018] NZHC 3169
•4 December 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2017-404-2625
[2018] NZHC 3169
BETWEEN NORTHWEST DEVELOPMENTS LIMITED
Plaintiff
AND
CHENG ZHANG, JIN KUK JUNG, PILL SOON SO
Defendants
Hearing: 05 September 2018 Appearances:
M J Fisher for Plaintiff
R M Dillon for Defendants
Judgment:
4 December 2018
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 04 December 2018 at 3pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors:
Castle Brown, Auckland Queen City Law, Auckland
Counsel:
M J Fisher, Auckland
NORTHWEST DEVELOPMENTS LIMITED v ZHANG & ORS [2018] NZHC 3169 [4 December 2018]
[1]The parties seek costs in relation to interlocutory applications which each made
– following the making of orders by way of summary judgment regarding the completion of arrangements for the subdivision of a parcel of land – and then withdrew.
Relevant factual background1
[2] The owners of five parcels of land in an area known as the Huapai Triangle agreed to work together to enable their land to be subdivided and, to that end, to seek an appropriate variation to the District Plan. Their agreement was recorded in what became known as the 5 Owners Agreement.
[3]Under the 5 Owners Agreement, each party agreed, among other things:
(a)to grant easements over its land, including for access and roading purposes, and to do all that was necessary to vest in the District Council land required for roading purposes; and
(b)to assign its rights and obligations under the Agreement when transferring its land to a successor in title, and to cause its successor in title to be bound to the transferor’s rights and obligations under the Agreement.
[4] The defendants (the Jung interests), owned the property at 77 Nobilo Road, one of the parcels of land covered by the 5 Owners Agreement, and are signatories to the 5 Owners Agreement.
[5] The plaintiff (Northwest) became a party to the 5 Owners Agreement when it purchased from one of the signatories to the Agreement another parcel of land, which was adjacent to 77 Nobilo Road and covered by the Agreement, and agreed to be bound by the 5 Owners Agreement.
1 The following summary is drawn from the decision of Brewer J in Northwest Development Ltd v Zhang [2018] NZHC 1736.
[6] The District Plan was varied as sought by the parties to the 5 Owners Agreement.
[7] In April 2016, the Jung interests and other owners consented to the subdivision and associated infrastructure works proposed by Northwest for its land, including the road.
[8] In May 2016, the Jung interests entered into a sale and purchase agreement with Sanli Homes Ltd (Sanli) for the property at 77 Nobilo Road. The Jung interests did not, however, assign or transfer to Sanli their rights and obligations under the 5 Owners Agreement and did not require Sanli to be bound by the 5 Owners Agreement.
[9] After Northwest had completed the subdivision of its land, the survey plan had to be deposited before the new titles could be issued. However, because the survey plan provided for a strip of the property at 77 Nobilo Road to vest in the District Council as part of the agreed roading works for the subdivision, Northwest required the consent of the Jung interests and parties with interests registered against 77 Nobilo Road. Those parties included Sanli, which had registered a caveat in respect of its sale and purchase agreement.
[10] The Jung interests said they held the land at 77 Nobilo Road and any rights under the 5 Owners Agreement on trust for Sanli. They said they were willing to sign the survey plan to allow it to be deposited but required the consent of Sanli, which they did not have.
[11] Northwest brought summary judgment proceedings for orders requiring the Jung interests to consent to the survey plan and to procure the consent to the survey plan of others with interests registered against the land at 77 Nobilo Road.
[12] On 13 July 2018, Brewer J granted Northwest’s summary judgment application and made a declaration to the effect that the Jung interests were bound under the 5 Owners Agreement:
(a)To consent to the survey plan;
(b)To procure consent to the survey plan from any person with a registered interest in 77 Nobilo Road;
(c)If consent to the survey plan was not immediately forthcoming, to take such other steps as may be reasonably required to procure the withdrawal of any relevant caveats, including the initiation of procedures under s 145A of the Land Transfer Act.
[13] On 17 July 2018, Northwest provided Sanli, with whom Northwest had direct communications, a copy of Brewer J’s judgment and sought Sanli’s consent to the survey plan.
[14] On 18 July 2018, Sanli indicated it would take time to consider its position and said it hoped to respond by Friday, 27 July 2018.
[15] Sanli’s response led to a disagreement between Northwest and the Jung interests over whether the Jung interests were required – as Northwest asserted but the Jung interests denied – to apply to initiate procedures under s 145A of the Land Transfer Act.
[16] On 18 July 2018, the Jung interests lodged an appeal against Brewer J’s judgment and applied for a stay of execution.
[17] At a mentions hearing on 2 August 2018, Jagose J gave directions for the hearing of the Jung interests’ application for a stay and Northwest’s signalled application for ancillary orders to give effect to Brewer J’s judgment.
[18] On 3 August 2018, the solicitors for the Jung interests wrote a letter, headed “without prejudice save as to costs” to the solicitors for Sanli and to the solicitors for Northwest proposing, among other things, that:
(a)All parties withdraw their claims against the others;
(b)Sanli sign the novation to the 5 Owners Agreement;
(c)Sanli and the Jung interests consent to the survey plan;
(d)Each party bear its own costs.
[19] On 9 August 2018, the Jung interests made an application under s 145A of the Land Transfer Act to lapse Sanli’s caveat.
[20]On 20 August 2018, Sanli gave its consent to the survey plan.
[21]On 23 August 2018, the Jung interests gave their consent to the survey plan.
[22] On 28 August 2018, the solicitors for the Jung interests wrote an email, headed “without prejudice save as to costs” to the solicitors for Northwest proposing that the Jung interests and Northwest discontinue the applications for a stay and for ancillary orders with no issue as to costs.
[23] In the event, the applications for a stay of execution and for ancillary orders were withdrawn but the Jung interests and Northwest each seek costs in respect of those applications from the other.
Costs sought by parties
[24] In respect of the Jung interests’ application, Northwest seeks costs on a 2 B basis of $1,879.25 for:
(a) Filing a notice of opposition (0.6 days): $1,338.00 (b)
Appearance at mentions hearing (0.2 days):
$446.00
(c)
Disbursements (filing fee for notice of opposition):
$95.65
[25]In respect of its own application, Northwest seeks costs on a 2 B basis of
$1,772.78 for:
(a) Filing application for ancillary orders (0.6 days): $1,338.00 (b)
Disbursements (filing fee for application):
$434.78
[26]Northwest also seeks costs on a 2 B basis in respect of its costs application of
$1,338.00, for:
(a) Preparation of memorandum (0.4 days): $892.00 (b)
Appearance at hearing on costs (0.2 days):
$446.00
[27] The Jung interests seek solicitor-client costs in respect of both applications from 3 August 2018 of $10,551.25, as well as the preparation of a memorandum on costs and appearance at the costs hearing. The Jung interests also seek filing fees of
$610.00.
Contentions of parties
[28] Mr Fisher, counsel for Northwest, says that Northwest’s application for ancillary orders was appropriate because Sanli’s consent to the survey plan had not been “immediately forthcoming” as required by the orders made by Brewer J on 13 July 2018 and because the Jung interests had applied for a stay of that decision. The fact that Sanli and the Jung interests had later consented to the survey plan, thereby rendering the application unnecessary, meant that Northwest had succeeded with its application and should be awarded costs.
[29] With respect to the Jung interests’ application for a stay of Brewer J’s judgment, Mr Fisher says that Brewer J expressly protected the interests of Sanli when he noted that Sanli would have the right, in an application to lapse the caveat, to show cause as to why its interests should prevail over those of Northwest. Therefore, the Jung interests’ application for a stay was unnecessary and Northwest is entitled to costs on the basis that r 15.23 of the High Court Rules 2016 should be applied by analogy to the withdrawal of an interlocutory application.
[30] Mr Dillon, counsel for the Jung interests, says the Jung interests’ appeal against Brewer J’s judgment raised the question of whether Northwest had a claim against the Jung interests and the separate question of the priority of competing interests over their land. He also says the Jung interests had a responsibility to protect the interests of Sanli as the equitable owner of the land and were required to appeal Brewer J’s decision until Sanli had consented to the survey plan, while at the same time making clear their readiness to consent to the survey plan once Sanli’s consent.
[31] Mr Dillon also says the Northwest application became redundant once Sanli had consented to the survey plan, whereas the stay application remained alive and could have been pursued had the Jung interests not decided to be pragmatic and withdraw it. He submits that this pragmatism should be rewarded. Mr Dillon also says account should be taken of the without prejudice communications the Jung interests’ solicitors wrote to Northwest’s solicitors on 3 and 28 August 2018 which, he suggests, amount to Calderbank offers and warrant costs being granted on a solicitor- client basis.
Discussion
[32]Rule 15.23 of the High Court Rules provides:
Unless the defendant otherwise agrees or the court otherwise orders, 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.
[33] While an interlocutory application is not a “proceeding”, as Duffy J held in Ip v Ip, r 15.23 applies by analogy to interlocutory applications that have been discontinued.2 On that basis, there is a presumption that since both Northwest and the Jung interests withdrew their applications, each should be required to meet the others’ costs.
[34] As held by Gendall J in Obrecht v Earthquake Commission,3 success on the part of the party withdrawing an interlocutory application can be a reason for awarding
2 Ip v Ip [2016] NZHC 528 at [16]
3 Obrecht v Earthquake Commission [2015] NZHC 555.
costs against the other party. In Obrecht, Gendall J held that the defendants had been successful when they had withdrawn their strike out application after the plaintiffs had amended their statement of claim to remedy defects in the original claim that had been identified by the defendants. Accordingly, the plaintiffs were ordered to pay the defendant’s costs.
[35] By analogy, there can be little doubt that Northwest was successful with its application for ancillary orders. The need for the orders was removed once Sanli and the Jung interests had consented to the survey plan.
[36] The Jung interests were not similarly successful with their application for a stay. Whether or not the stay application was justified because of the Jung interests’ responsibilities to Sanli, the withdrawal of the application was not because of any “success” in relation to Northwest.
[37] As the Court of Appeal confirmed in Kroma Colour Prints Ltd v Tridonicatco NZ Ltd, when considering an award of costs following the withdrawal of proceedings, a court may have regard to the reasonableness of the stance of the parties even if it does not speculate on the respective strengths of their cases.4
[38] In the present case, I consider that Northwest’s application was reasonable and was appropriately brought following:
(a)The equivocal response Northwest received from Sanli upon Sanli being informed of Brewer J’s decision; and
(b)The Jung interests’ application for a stay of Brewer J’s decision.
[39] On the other hand, both of those steps – the Sanli response and the application for the stay – were the consequence of the Jung interests’ failure to comply with their obligations under the 5 Owners Agreement as found by Brewer J. Furthermore, I consider the Jung interests prevaricated in giving effect to Brewer J’s decision, notwithstanding Brewer J’s clear findings that the Jung interests were in breach of the
4 Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at [12].
5 Owners Agreement and had no defence to Northwest’s claim, whatever the Jung interests’ responsibilities to Sanli might be. In these respects, I do not consider the stance of the Jung interests to have been reasonable, notwithstanding Mr Dillon’s attempts to persuade me there was legal substance to the Jung interests’ position.
[40] Accordingly, both success and the respective stances of the parties strongly favour Northwest.
[41] I do not accept Mr Dillon’s submission that the Jung interests should be rewarded for their pragmatism in withdrawing the stay application. Regardless of their appeal rights, the purpose of the stay application was effectively spent once Sanli had consented to the survey plan.
[42] Nor do I give any weight to the without prejudice communications. The communications were not true Calderbank offers in the terms established in Calderbank v Calderbank5 and later incorporated into r 14.10 of the High Court Rules. No offer was made which was later vindicated by the quantum of damages, as occurs when orders are made on the basis of a Calderbank letter.6 The communications in this case simply proposed that each side drop its claims with no issues as to costs.
[43] Even if the communications were regarded as offers of settlement for the wider purposes of r 14.6, which is not confined to Calderbank offers, Northwest’s non- acceptance of the offers could not be said to have been “without reasonable justification” in terms of the rule:
(a)Northwest could not reasonably be expected to agree to the proposals in the letter of 3 August 2018 unless and until Sanli had consented to the survey plan. Sanli did not give consent for another two weeks.
(b)The email of 28 August 2018 was written after Sanli and the Jung interests had consented to the survey plan and met the purpose of the
5 Calderbank v Calderbank [1975] 3 All ER 333 (CA).
6 Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676, 13 July 2009 at [13].
ancillary orders sought by Northwest. Accordingly, there was no reason for Northwest to agree to the Jung interests’ proposal.
[44] For the above reasons, I find that the Jung interests should pay Northwest’s costs on a 2B basis as submitted by Mr Fisher.
Result
[45]The Jung interests are to pay Northwest’s costs on 2B basis with respect to:
(a)The Jung interests’ application for a stay of Brewer J’s judgment of 13 July 2018;
(b)Northwest’s application for ancillary orders;
(c)The preparation for and costs of the hearing of this costs application.
[46] I order costs as set out in the schedule of costs and disbursements attached to the memorandum dated 3 September 2018 of counsel for the plaintiffs. This results in costs of $4,460 plus disbursements of $530.43 being payable by the Jung interests.
G J van Bohemen J
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