Pacific Pearl Accommodation Limited v Zhou

[2024] NZHC 2523

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002230

[2024] NZHC 2523

BETWEEN

PACIFIC PEARL ACCOMMODATION LIMITED

Plaintiff/Counterclaim Defendant

AND

KENING ZHOU and NAIYUAN SANG as

Trustees of the ZHOU AND SANG FAMILY TRUST

Defendants/Counterclaim Plaintiffs

Hearing:	(On the papers)
Judgment:	4 September 2024

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 4 September 2024 at 2.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors/Counsel: Maria Taylor, Auckland Matt Taylor, Auckland

Wynn Williams, Auckland

PACIFIC PEARL ACCOMMODATION LTD v ZHOU and SANG [2024] NZHC 2523 [4 September 2024]

[1]                 The Registrar has referred this file to me as duty Judge to deal with the issue of costs on the discontinuances of the plaintiff’s claim and defendants’ counterclaim.

[2]                 The proceeding had a substantive fixture scheduled for 21 October 2024, with five days allocated. On 13 May 2024 the plaintiff discontinued its claim against the defendants. On 17 July 2024 the defendants discontinued their counterclaim against the plaintiff.

[3]All that remains is the issue of costs. The parties have exchanged submissions.

Defendants’ position

[4]                 The defendants note that the proceedings were commenced by the plaintiff on 21 October 2019 and were discontinued without the defendants’ consent that no costs were payable.   The defendants  seek costs  on the plaintiff’s discontinuance under    r 15.23 in the sum $30,831, calculated on a 2B basis, together with disbursements of

$110.

Plaintiff’s position

[5]                 The plaintiff submits that as both parties have discontinued their claim and counterclaim the Court should exercise its discretion to order that costs lie where they fall. Alternatively, the plaintiff submits that the plaintiff should have costs on the discontinuance of the defendants’ counterclaim in the sum of $18,863, together with disbursements of $220.

Background

[6]                 The plaintiff is the lessee of a boarding house in Favona (the property) under a deed of lease. The defendants are the current lessors having purchased the property from the original lessor.

[7]                 Prior to the defendants settling the purchase of the property they discovered a Code Compliance Certificate had never been issued for it. By letter of 2 October 2014 the plaintiff agreed to obtain, at no cost to the defendants, a Code Compliance Certificate and Certificate of Acceptance.

[8]                 Subsequently, various issues arose between the parties concerning the lease. The defendants issued a notice under the Property Law Act indicating an intention to cancel the lease.

[9]                 In July and September 2019, the plaintiff sought the defendants’ consent to an assignment of the lease to a prospective purchaser. The agreement was conditional on the prospective purchaser settling another sale and purchase agreement. In response to the plaintiff’s request for consent the defendants maintained they were entitled to compliance with the agreement by the plaintiff to obtain the Code Compliance Certificate. Ultimately, the proposed purchaser did not proceed with the purchase of the plaintiff’s business.

[10]              On 21 October 2019, the plaintiff commenced these proceedings. The first two causes of action sought relief in relation to the proposed cancellation of the lease. The third cause of action alleged the defendants had unreasonably withheld their consent to the assignment.

[11]              Ultimately the defendants sought an order cancelling the lease which was declined by van Bohemen J on 26 November 2020.

[12]              The plaintiff however maintained its claim based on the alleged unreasonable withholding of consent to the assignment. The defendants counterclaimed seeking performance of the plaintiff’s agreement to obtain the Code Compliance Certificate.

[13]              Subsequently, on 30 March 2023 the plaintiff obtained the Code Compliance Certificate. Despite that, the defendants filed an amended statement of defence and counterclaim in February 2024. They sought a declaration the plaintiff had been required to obtain the certificate and also sought the costs associated with attempting to enforce it.

[14]              The plaintiff’s briefs of evidence were due on 29 March 2024. The plaintiff did not file or exchange briefs before filing the discontinuance.

Analysis

[15]              The presumption under r 15.23 is that a plaintiff who discontinues a proceeding must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance. The presumption may be displaced if the Court finds there are circumstances which make it just and equitable it should not apply.

[16]              Generally the Court will not consider the merits of the respective cases unless they are so obvious that they should influence the costs’ outcome. The Court will consider the reasonableness of the stance of both parties to the point of discontinuance. The reason for discontinuing may be relevant, for example, a change in circumstances.1

[17]              On the information before the Court from the Court record there is nothing which displaces the presumption and the associated principle of certainty in relation to the costs sought by the defendants in this case. The defendants are entitled to the costs they seek on the plaintiff’s discontinuance of $30,831 plus disbursements of

$110.

[18]              The issue is whether the plaintiff is entitled to costs on the defendants’ discontinuance of the counterclaim. The defendants submit that, even if r 15.23 can apply to the counterclaim none of the steps claimed are solely attributed to the presence of the defendants’ counterclaim. They say the relevant steps had to be taken irrespective of the counterclaim owing to the fact the plaintiff initiated the proceedings. The costs would still have been incurred whether or not the counterclaim had ever been brought. They say there was good reason to discontinue the counterclaim, it having been filed in order to have the plaintiff fulfil its obligations under the agreement. The only remaining relief was a declaration and costs.

[19]              I accept there is no reason r 15.23 should not apply to a discontinuance of the counterclaim. Such an approach is consistent with r 14.16 which confirms the Court must award costs as if each party had succeeded in an independent proceeding where the claim and counterclaim are established.

1      Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150.

[20]              But I also accept the force of submission for the defendants that the initial steps in relation to the counterclaim were necessarily a response to the plaintiff’s extant claim. Further, the defendants effectively succeeded with that claim as the relief they sought, specific performance of the obligation to obtain the Code Compliance Certificate was ultimately achieved by the issue of the Code Compliance Certificate.

[21]              However the position changed with the issue of the Code Compliance Certificate. From that date the nature of the counterclaim was different. On that basis I consider the plaintiff is entitled to the costs claimed by it from and including the memorandum of counsel dated 28 March 2023 which were directed at the steps taken after the Code Compliance Certificate was obtained. Those costs total $3,346, together with disbursements of $110.

[22]              High Court Rule 14.17 applies in that the costs awarded to the plaintiff are to be set off against the costs awarded to the defendants.

Result

[23]              The resultant costs order is an order in favour of the defendants against the plaintiff in the sum of $27,485.00.

Venning J