Osborne v First Credit Union
[2018] NZHC 546
•27 March 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
CIV-2016-485-989
[2018] NZHC 546
IN THE MATTER of an appeal under s 151 of the Friendly Societies and Credit Unions Act 1982 BETWEEN
WYN OSBORNE, CRAIG GOLD AND
BRUCE BHIKHU BHANA AS TRUSTEES, FOR THE TIME BEING, OF THE
NEW ZEALAND ASSOCIATION OF CREDIT UNIONS
Appellants
AND
FIRST CREDIT UNION
Intervener
Hearing: On the papers Counsel:
D J Friar and B J Ward for Appellants
D M Hughes and J V R James for Intervener
Judgment:
27 March 2018
JUDGMENT OF THOMAS J (COSTS)
[1] The appellants, the trustees for the time being of the New Zealand Association of Credit Unions (NZACU), seek indemnity costs against the intervener, First Credit Union (FCU), following their successful appeal as determined by my decision dated 16 November 2017.1
1 Re New Zealand Assoc of Credit Unions [2017] NZHC 2806.
RE NEW ZEALAND ASSOCIATION OF CREDIT UNIONS [2018] NZHC 546 [27 March 2018]
[2] Neither NZACU nor FCU seek costs against the Registrar of Friendly Societies and Credit Unions (the Registrar), nor does the Registrar seek costs against NZACU or FCU.
Background
[3] Since 1994, NZACU2 has had its rules (the Rules) approved by the Registrar allowing it to provide services to associate members and, since 2003, to third parties.3
[4] The Registrar’s approval of the Rules is required pursuant to s 146 of the Friendly Societies and Credit Unions Act 1982 (the Act). Following complaints made by a former member, Westforce Credit Union (Westforce), and FCU, the Registrar determined by decision dated 18 November 2016 (the Decision) that the Rules allowing associate members to purchase NZACU business services, and allowing NZACU to provide them, were inconsistent with the Act and therefore invalid.
[5] NZACU appealed the Decision. The Registrar, while not a respondent, filed a notice of appearance and a report to the Court. Westforce was given leave to file an appeal but subsequently abandoned it. It filed evidence confirming it disagreed with the Decision but was not represented at the hearing. FCU was granted leave to intervene (the Joinder Judgment).4 It filed affidavit evidence and was represented at the appeal.
[6]I allowed the appeal, concluding:
[82] The objects of NZACU are prescribed by s 143(3) of the Act. Pursuant to s 101(2), NZACU has the power to take any action or do anything directly in pursuance of those objects or incidental to them, provided that action is authorised by the Rules or the Act.
[83] In order to provide any services to associate members or third parties, the Rules must allow NZACU to do so. The Rules at issue allow NZACU to provide services to associate members. Whether provision of those services is directly or indirectly in pursuance of NZACU’s objects is then a question of fact. The evidence provided in support of NZACU’s position is to the effect
2 Originally called the New Zealand Credit Union League, later the New Zealand Association of Credit Unions and currently trading as Co-op Money NZ.
3 New Zealand Association of Credit Unions Rules 2003, r 6.1(o).
4 Bleakley v Registrar of Friendly Societies and Credit Unions [2017] NZHC 471 [Joinder Judgment].
that the offering of business services to associates does fall within the objects and powers. Whether that continues to be the case will again be a question of fact.
The law
[7] Costs are at the discretion of the Court, qualified by the principles in the Rules.5 The intent of the Rules is to provide reliable and expeditious costs decisions and to do justice to both parties.6 The general principle is that costs follow the event unless particular considerations indicate otherwise.7
[8]High Court Rule 14.6(4) governs the awarding of indemnity costs:
14.6 Increased costs and indemnity costs
(1)Despite rules 14.2 to 14.5, the court may make an order—
(a)increasing costs otherwise payable under those rules (increased costs); or
(b)that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
…
(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; or
…
(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[9] Bradbury v Westpac Banking Corp is the leading case and the principles outlined in that judgment have recently been confirmed by the Court of Appeal.8 In Bradbury, the Court of Appeal described increased costs as warranted where “there is
5 High Court Rules 2016, r 14.1(1)–(2); and Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7]–[8].
6 High Court Rules 2016, r 14.2(g).
7 Rule 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].
8 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400; and Ben Nevis Forestry v Commissioner of Inland Revenue [2014] NZCA 348, (2014) 22 PRNZ 322.
failure by the paying party to act reasonably” and indemnity costs “where that party has behaved either badly or very unreasonably”.9 Specifically, the Court identified the following circumstances as ones where indemnity costs have been ordered:10
(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b)particular misconduct that causes loss of time to the court and to other parties;
(c)commencing or continuing proceedings for some ulterior motive;
(d)doing so in wilful disregard of known facts or clearly established law;
(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J's “hopeless case” test.
Costs against an intervener
[10] In granting FCU leave to intervene, Ellis J noted in the Joinder Judgment that FCU would potentially be liable for costs.11 Her Honour observed the considerations in Earthquake Commission v Insurance Council of New Zealand may govern such issues.12
[11] In that case, a full Bench of the High Court addressed costs following its judgment concerning the scope of statutory cover available under the Earthquake Commission Act 1993 and the validity of a policy developed by the Earthquake Commission for dealing with claims arising out of increased flooding vulnerability. All parties had agreed that costs should lie where they fell. The interveners took a different position, seeking an order requiring the Commission to pay costs to them. The application was made pursuant to s 99A of the Judicature Act 1908. Like the High Court Rules, s 99A confers a broad discretion on the Court in relation to costs. In the decision, the full Bench noted the discretion must be exercised on a principled basis and the enquiry will depend upon the particular circumstances. In relation to
9 At [27].
10 At [29].
11 Joinder Judgment, above n 4, at [43].
12 Earthquake Commission v Insurance Council of New Zealand Inc [2015] NZHC 457.
whether an order under s 99A was appropriate, the Court outlined the following factors:13
(a)whether the case involves a matter of substantial public importance;
(b)whether the intervener represents a field of interest relevant to the proceeding beyond their private or personal viewpoint;
(c)whether the intervener provided material assistance to the Court by presenting evidence or submissions on an issue or issues not adequately covered by the other parties or at all;
(d)whether any of the principles guiding a costs award under the High Court Rules may be applicable by analogy.
[12] The cases canvassed by the High Court all concerned an intervener’s application for costs against a party. In the event, the High Court declined to make an order for costs in favour of the interveners in the circumstances of that case.
[13] In Wallace Corp Ltd v Waikato Regional Council,14 the successful party, Waikato Regional Council, sought costs against the intervener, URS NZ Limited, on the basis that:
(a)the case involved a novel and difficult aspect of the law which required lengthy and detailed submissions;
(b)the issues on appeal were significant not only for the Council but for all councils and those who prosecute under the Summary Proceedings Act 1957; and
(c)the involvement of the intervener increased the complexity of the case.
13 At [6].
14 Wallace Corp Ltd v Waikato Regional Council [2011] NZCA 350.
[14] However, the Court of Appeal declined to award costs against the intervener, stating:
[6] As to the involvement of URS as an intervener, it had a legitimate interest in the outcome of the appeal. Its presence at the appeal did not add materially to the length of the appeal, or to the extent of the preparation required of the Council, as the submissions of the appellants and URS were complementary rather than repetitive. Again, URS did not raise vexatious or frivolous points.
[15] The circumstances of the present case were somewhat different because, as the Joinder Judgment made clear, the Registrar was to play a limited role and FCU was to play the role of contradictor.
[16] There are some parallels between the circumstances of the present case and FCU’s role within it, and an appeal from a decision of a district or regional council under the Resource Management Act 1991. A successful applicant for resource consent participates in the appeal against the grant of that resource consent and is named as a respondent. Even though the decision under appeal is that of the Council, as a participating party, the applicant is liable for costs.
[17] In Beach Road Preservation Society Inc,15 Chambers J determined costs between two unsuccessful respondents: the council and a resource consent applicant, Mr Wilkinson. One issue was whether Mr Wilkinson should be liable because the council was responsible for the error on which the judicial review turned. Chambers J rejected that submission and ordered costs, jointly and severally between the two, saying:
[21] … On a costs application we are not concerned with how the original decision under attack came to be made. What we are concerned with is the litigation itself. The society brought a claim correctly identifying the council and Mr Wilkinson as respondents. On being served with the notice of proceeding and statement of claim, the council and Mr Wilkinson had an election: to defend the proceeding or not. Both chose to defend the proceeding. I concluded that the proceeding was well brought. The society is entitled to costs. Both respondents must share responsibility for those costs because, and only because, each decided to defend the proceeding, wrongly, as it turned out. That is why they must pay costs to the society. It is irrelevant how the land came to be zoned as it was or how the resource consent decision came to be made. Parties pay costs because they have elected to bring or
15 Beach Road Preservation Society Inc v Whangarei District Council (2001) 16 PRNZ 13 (HC).
defend proceedings and have adopted a stance in those proceedings which a court has found to be unjustified.
[18] Even more analogous perhaps are situations where, on an appeal against a council’s decision, the council abides the Court’s decision and the party in whose favour the council’s decision had been made plays a more active role. In Kawarau Jet Services Holdings Ltd,16 the council abided the Court’s decision but the second defendant, a private entity, resisted the judicial review application. The council was responsible for the error (a decision to process a resource consent on a non-notified basis) which led to a successful review. After citing the passage from Beach Road above, French J stated:
[18] … Ultimately, the task of the Court is to make an assessment of overall justice as between the particular parties. On the facts of this case, where the Council made a very fundamental and serious error which necessitated the issuing of proceedings, I consider the Council should make a contribution. However, because it responsibly did not defend the proceeding, its liability should be limited to 20% of the costs and disbursements, excluding the costs of the experts.
[19] In summary, the ultimate task of the Court is to make an assessment of overall justice as between the particular parties, in the particular circumstances. Relevant to this assessment is, inter alia, whether and in what manner the parties participated in the proceedings,
Analysis
[20] NZACU seeks indemnity costs against FCU on the basis FCU acted vexatiously, frivolously, improperly or unnecessarily in that:
(a)FCU made the complaint to the Registrar (the Complaint) and pursued its opposition to the appeal, despite the fact FCU had voted in favour of the relevant Rules, had repeatedly voted in favour of similar rules in the past, and had supported NZACU expanding services to Associates and third parties;
16 Kawarau Jet Services Holdings Ltd v Queenstown Lakes District Council HC Invercargill CIV-2008-425-518, 19 May 2009.
(b)FCU made the Complaint and pursued its opposition to the appeal for ulterior motives (including to pursue a personal dispute);
(c)FCU made the Complaint and pursued its opposition to the appeal despite the fact FCU was already withdrawing its business from NZACU and in the knowledge that, if NZACU was unable to replace that business as a result of the Complaint, this could cause significant damage to NZACU and its Members; and
(d)FCU applied to intervene on the basis it would fulfil a wider role in the appeal and then failed to do so.
[21]NZACU advances four further reasons why indemnity costs are appropriate:
(a)if the Decision had been upheld, the potential consequences for NZACU could have been significant;
(b)the lack of any further right of appeal meant NZACU had little option but to pursue the appeal in a comprehensive and thorough manner;
(c)the informal process before the Registrar and lack of evidence meant the appeal had to be prepared for in a manner similar to a full hearing rather than an appeal; and
(d)the Decision had wider implications for the objects and powers of credit unions generally. It was therefore in the wider interests of the credit union movement for NZACU to pursue the appeal.
[22] It was the original complaint by Westforce followed by that of FCU which resulted in the Decision and appeal. The Registrar determined there was merit in the Complaint and made the Decision accordingly. NZACU appealed as was its right.
[23] I made a reference to Westforce’s and FCU’s motives in my decision, only to note that I put the evidence to one side as it was not relevant to the interpretation of
the Act.17 The allegations as to FCU’s motives are comprehensively detailed in NZACU’s submissions on costs. FCU noted it did not respond to the evidence concerning its motive because counsel did not consider it appropriate to do so. If indeed the position is as NZACU contends, then feelings of betrayal and disillusionment on the part of the other members of NZACU are readily understandable. Any such motives are, however, much less relevant to FCU’s participation in the appeal because that was the result of the Decision.
[24] I accept that FCU was encouraged somewhat to participate in the appeal, it being the view of the Registrar that FCU should be joined. I also accept that the Joinder Judgment, following the Registrar being struck out as a respondent, identified the role FCU would play as a contradictor, saying:18
[18] The present applications raise something of a “chicken and egg” issue. That is because (as my summary of the Registrar’s position above, and the discussion which follows, shows) the presence or absence of a contradictor can be relevant to the question of joinder but, conversely, the extent to which the Registrar himself takes on a contradictor role might depend on the presence or absence of another respondent or intervenor.
[25] It is clear FCU was granted leave to intervene because the Registrar had a limited role and Westforce did not wholly support the Decision. There needed to be a true contradictor for the appeal.
[26] It is also true that, regardless of FCU’s involvement in the appeal, NZACU would have incurred the same costs in conducting the appeal. Because of the importance of the Decision, NZACU had to prepare comprehensively for the appeal. This included affidavit evidence and considerable material on the provision of services by NZACU. The evidence was necessary, as I noted in my decision,19 because what NZACU has done, and why, supported NZACU’s case that its actions were directly in pursuance of the objects set out in s 143(3) of the Act or incidental to them.
[27] NZACU contends that FCU then took full advantage of its status and fully participated in its role in the same way as a respondent and, on that basis, the Court
17 Re New Zealand Assoc of Credit Unions, above n 1, at [37].
18 Joinder Judgment, above n 4.
19 Re New Zealand Assoc of Credit Unions, above n 1, at [79].
should approach costs in the usual way. However, NZACU then submits that FCU overstated the assistance it would provide the Court on the appeal and failed to do what it had expressly said it would do when applying for joinder. FCU filed one further affidavit in opposition but did not provide any evidence or information about the operation of credit unions generally or how the issues on appeal would affect credit unions.
[28] Ultimately, I have no complaint with the way in which FCU participated in the appeal. Its submissions were brief and confined to the issue before the Court, being the correct interpretation of the Act.
[29]For those reasons, the application for indemnity costs is refused.
Should FCU pay increased scale costs or should costs lie where they fall?
[30] NZACU’s fall-back position is that scale costs with an uplift of 50 per cent should be imposed essentially for the same reasons as set out in support of the application for indemnity costs. FCU submits that costs should lie where they fall. FCU relies on the premise that the proceeding concerned a matter of public interest and FCU acted reasonably in the conduct of the proceeding.20
[31] For the same reasons as set out above in relation to indemnity costs, I am not satisfied increased costs are appropriate. They are warranted where there is a failure by the paying party to act reasonably.21 That is not the case here.
[32] The question then is whether FCU should be liable for costs at all. As noted in the analysis of cases above, parties pay costs because they have adopted a stance in the proceeding which a court has found to be unjustified. The ultimate task of the court is to make an assessment of the overall justice as between the parties in the particular circumstances.
[33] FCU applied to be joined as a party and was ultimately granted leave to intervene so there would be a contradictor for the appeal. FCU took the opportunity
20 High Court Rules 2016, r 14.7(e).
21 Rule 14.6(3)(b); and Bradbury v Westpac Banking Corp, above n 8.
to participate. The circumstances are quite different from those in Earthquake Commission v Insurance Council of New Zealand.22 FCU did not play the role of representing the wider interests of credit unions or providing any evidence about the operation of credit unions generally. In my assessment, the role it played was to advance what it clearly perceived was its own best interests in pursuing the Complaint. In these circumstances, I consider FCU should be ordered to pay costs which I fix on a 2B basis. Those costs apply from the date of the Joinder Judgment, that being the start of FCU’s role as a contradictor. In light of the complexity and importance of the case, I certify for second counsel.
Result
[34] For the reasons given, FCU are to pay costs on a 2B basis as from 16 March 2017, together with disbursements.
Solicitors:
Bell Gully, Auckland for Appellants Anthony Harper, Auckland for Intervener
22 Earthquake Commission v Insurance Council of New Zealand, above n 12.
8
0