Parklane Infrastruct Limited v Lu Trustee Limited
[2023] NZHC 1309
•29 May 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV 2020-419-000144
[2023] NZHC 1309
BETWEEN PARKLANE INFRASTRUCT LIMITED
Plaintiff
AND
LU TRUSTEE LIMITED and HO NO.2 TRUSTEES LIMITED
Defendants
On the papers Counsel:
C Matsis for the Plaintiff
A S Ross KC and K E Cornegé for the Defendants
Judgment:
29 May 2023
JUDGMENT OF VAN BOHEMEN J
(on costs)
This judgment was delivered by me on 29 May 2023, at 3:30 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar Date……………………………..
Solicitors/Counsel:
Gault Mitchell Law, Wellington A S Ross KC, Auckland Tompkins Wake, Hamilton
PARKLANE INFRASTRUCT LTD v LU TRUSTEE LTD (costs) [2023] NZHC 1309 [29 May 2023]
[1] The defendants, Lu Trustee Ltd and Ho No. 2 Trustees Ltd, seek indemnity costs or, in the alternative, increased costs against the plaintiff, Parklane Infrastruct Ltd (Parklane), following my judgment dismissing an application by Parklane for orders to give effect to access rights under an agreement it claimed to have with the defendants.1
[2] If scale costs are applied, the defendants say that Category 2, Band B rates should apply to most pre-hearing costs but that Category 3 rates should apply to some pre-hearing steps and to all hearing steps. They also say a 75 per cent uplift should be applied to all costs.
[3] Parklane accepts that the defendants are entitled to costs but says costs should be limited to scale costs calculated at Category 2, Band B rates. Parklane also says any uplift on scale costs should be limited to steps taken after Parklane declined to accept an offer of settlement made on 11 June 2021 and should be no more than 50 per cent.
Relevant background
[4] The defendants are trustee companies and partners in the Trinity Green Estate Partnership (Trinity).
[5] The access rights claimed by Parklane were rights over land owned by Trinity outside Cambridge. The purpose of the rights was to obtain access to adjacent land formerly owned by Fonterra (the ex-Fonterra land), which Parklane did not own or intend to buy but in respect of which Parklane wished to secure development rights.
[6]The access rights were said to have arisen under:
(a)a letter dated 14 February 2019 from Henry Wu, one of Trinity’s principals, to Parklane, (the access letter), which stated that Trinity agreed to allow roading and services access across its land to provide access to the ex-Fonterra land; and
1 Parklane Infrastruct Ltd v Lu Trustee Ltd [2022] NZHC 2702 [the Access Rights Judgment].
(b)oral terms agreed by the parties at a meeting on 5 February 2019 or at a previous meeting.
[7] Most of the relevant interactions between Parklane and Trinity took place between Trent Cary, a consultant employee of Parklane, and Henry Wu.
[8] Parklane’s application followed a judgment by Moore J in which it was held that it was arguable that Trinity had granted Parklane an equitable easement over its land.2 Moore J ordered that the caveat Parklane had registered against the title to Trinity’s land not lapse but directed Parklane to issue proceedings seeking specific performance of its rights under the access letter.3
[9] Trinity appealed the Caveat Judgment but did not seek re-consideration of whether the access letter amounted to the grant of an easement. It accepted that that question would be determined at the substantive proceeding ordered by Moore J. The appeal was limited to whether Moore J was correct in holding there was an arguable case that Parklane had an interest over the whole of the Trinity land, including land Trinity had agreed to sell to Summerset Management Group Ltd (Summerset), which was proposing to develop a retirement village on adjacent land. The Court of Appeal allowed the appeal and set aside the order that the caveat not lapse, but subject to various conditions that do not bear on the issue of costs in this proceeding.4
Key findings in Access Rights Judgment
[10]In the Access Rights Judgment, I held that:
(a)the access letter and the communications leading up to the letter did not establish that the parties intended to conclude a binding agreement to confer legal access rights over Trinity’s land;5
2 Parklane Infrastruct Ltd v Lu Trustee Ltd [2020] NZHC 1182 [the Caveat Judgment] at [38].
3 At [50]
4 Lu Trustee Ltd v Parklane Infrastruct Ltd [2020] NZCA 682, (2020) 21 NZCPR 740.
5 The Access Rights Judgment, above n 1, at [176] – [177].
(b)even if there had been an intention to create a binding agreement between Trinity and Parklane, there was no consideration to support any such agreement;6 and
(c)Parklane had not established any estoppel with respect to Trinity’s conduct in relation to the asserted access rights.7
[11] Accordingly, I concluded that Parklane had no legal interest in relation to the land, no right to register a caveat against the title to the land and no right to the relief it sought.8 I directed that the caveat be removed.9
[12] I also recorded my conclusions on the reliability of the evidence given by Mr Cary, who was the main witness for Parklane. I held that Mr Cary’s claims that he believed Mr Wu intended to grant Parklane a legal right of access over Trinity’s land were not credible.10 I also held that Mr Cary’s claims that he believed Trinity had given Parklane a caveatable interest in land were not tenable.11
[13]I held that Trinity was entitled to costs and invited counsel to file memoranda.12
Counsel memoranda
Memorandum from counsel for the defendants
[14] By memorandum of counsel dated 8 November 2022, the defendants applied for indemnity costs of $249,083.94, including disbursements of $1,451.26, or, in the
6 At [185];
7 At [186] – [187].
8 At [188] – [ 189].
9 At [190].
10 At [195].
11 At [197].
12 At [198] – [202].
alternative, increased costs of $122,296.64, including disbursements of $1,451.26. Attached to the memorandum were two appendices setting out:
(a)the calculation of indemnity costs based on invoices tendered by the defendants’ solicitors, Tompkins Wake, and by senior counsel,
Mr Ross KC; and
(b)the bases on which scale and increased costs had been calculated.
[15] The grounds on which the defendants said indemnity costs were appropriate were:
(a)Parklane had commenced the proceeding knowing it was hopeless because Mr Cary knew Trinity had no intention of granting a legal right of access over its land;
(b)The proceeding was commenced so Parklane could sustain its caveat over Trinity’s land despite knowing it had no caveatable interest;
(c)Parklane’s caveat and the proceeding were employed for ulterior purposes; namely:
(i)to secure affected person status on Trinity’s application for resource consent to subdivide its land (to enable the sale of part of the land to Summerset);
(ii)to put pressure on Trinity and Summerset by holding up settlement of the sale to Summerset; and
(iii)to enable Parklane to use its asserted access rights to improve its prospects for securing development rights over the ex-
Fonterra land; and
(d)Parklane had been provided with the opportunity to discontinue its claim in a “without prejudice save as to costs” letter dated 11 June 2021
from Tompkins Wake to Parklane’s solicitors, which “offer” had not been accepted.
[16] The defendants said the claim for indemnity costs was for the actual costs reasonably incurred by the defendants, disbursements and witness expenses and excluded costs relating to the caveat proceeding and the appeal of the Caveat Judgment, Trinity’s dispute with Summerset and broader issues relating to disputes between Trinity and Summerset.
[17]The increased costs sought were based on a 75 per cent uplift on:
(a)Category 2 Band B costs totalling $25,812.00 for steps in the proceeding from the commencement of the defence in July 2020 to 21 December 2021; and
(b)Category 3 costs totalling $43,242.50 for steps taken in preparation for and at the hearing before me in August 2022.
[18] The memorandum was accompanied by an affidavit sworn by Jordan Louise Harris to which was exhibited copies of the Tompkins Wake letter of 11 June 2021, other correspondence and the invoices rendered by Tompkins Wake and Mr Ross. The narrations of the invoices were redacted on the grounds of privilege.
Memorandum from counsel for Parklane
[19] By memorandum of counsel dated 29 November 2022, Parklane accepted that the defendants were entitled to costs but disputed the claims to indemnity costs and increased costs.
[20] Parklane did not accept that its claim was bound to fail and noted the success achieved in the initial caveat proceeding before Moore J. It also asserted that any knowledge of Mr Cary could not be attributed to Parklane, his employer.
[21] Parklane did not accept that it had brought the proceeding for ulterior purposes and said there was no evidence to support such a contention. It said Trinity’s
application for affected person status was unrelated to the present proceeding and noted that the caveat proceeding and this proceeding took place after that date.
[22] Parklane said its wish to secure access across Trinity’s land for the purpose of improving its prospects of securing development rights for the ex-Fonterra land was not an ulterior motive. That had always been Parklane’s intention.
[23] Parklane said failure to accept a reasonable settlement did not give rise to indemnity costs, even if it may give rise to increased costs after the offer was refused. It also said the defendants’ costs of $249,083.94 were not reasonably incurred and that the defendants had not provided a proper evidential basis for that claim.
[24] Parklane submitted that the defendants were entitled only to Category 2 Band B costs for all steps in respect of which Trinity claimed costs. On that basis, the defendants’ costs would total $55,089.50, plus disbursements of $1,451.26. If the Court considered that sum insufficient, a 50 per cent uplift could apply to costs incurred after the settlement offer in June 2021. That would result in costs of
$77,854.25, plus disbursements of $1,451.26
Further memorandum from counsel for Trinity
[25] By memorandum of counsel dated 16 December 2022, the defendants responded to some of the points in the Parklane memorandum. They said Mr Cary had acted as agent for Parklane and that Murray Price, the sole director and shareholder of Parklane, had said in evidence that the access letter had confirmed his belief that Parklane would have the necessary access rights to develop the ex-Fonterra land.
[26] The further memorandum was accompanied by an affidavit sworn by Kate Elizabeth Cornegé, a partner at Tompkins Wake. In her affidavit, Ms Cornegé explained the analysis she had undertaken of the Tompkins Wake time records. That analysis and an analysis undertaken of Mr Ross’s invoices were exhibited to the affidavit. Ms Cornegé explained that, as a result of her analysis of the Tompkins Wake records, some entries had been reduced or removed from the claim for indemnity costs. As a consequence, the defendants’ claim for indemnity costs had reduced to
$245,906.60, including disbursements of $1,451.26.
[27] In the further memorandum, the defendants submitted that the analysis undertaken by Ms Cornegé showed what work had been carried out, by whom and for how long, the steps in the proceeding to which the work related and the hourly rate applied to that work. Accordingly, the defendants were not required to waive privilege in the narrations in the invoices but offered to provide unredacted versions of the invoices or time records to the Court.
[28] The defendants also submitted that if the Court were to award costs based on scale costs and an uplift, some of the costs incurred prior to 21 December 2021 should be classified as Category 3 costs because further discovery had to be undertaken by both parties.
[29] As a result of these proposed adjustments, the defendants’ claim for increased costs was revised to $135,264.15, plus disbursements of $1,451.26.
Applicable principles on costs
[30] As stated by the Supreme Court in Manukau Golf Club Inc v Shoye Venture Ltd and by the Court of Appeal in Bradbury v Westpac Banking Corp, and as reflected in the High Court Rules 2016, it is a fundamental principle that costs follow the event.13 While all matters relating to costs are at the discretion of the Court,14 that general discretion is qualified by the specific costs rules in the Rules and is exercisable only in situations not contemplated or not fairly recognised by the Rules. Ordinarily, the loser pays the winner’s costs according to the scale set out in the Rules.15 The scale reflects the complexity and significance of the proceeding and is assessed at two-thirds of the daily rate considered reasonable in relation to the proceeding.16
[31] In the circumstances provided for under r 14.6(3) and (4), the Court may either make an order for increased costs or an order for indemnity costs.
13 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8]; Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [6]; High Court Rules 2016, r 14.2(1)(a).
14 High Court Rules 2016, r 14.1(1).
15 Rule 14.2(1)(a).16 Bradbury v Westpac Banking Corporation, above n 13, at [6]; Rule 14.2(1)(d).
[32] Under r 14.6(3) the Court may order a party to pay increased costs if the party “has contributed unnecessarily to the time or expense of the proceeding” by, for example, “taking or pursuing an unnecessary step or an argument that lacks merit.”17
[33] Under r 14.6(4), the Court may also order a party to pay indemnity costs if the party has “acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding”.18
[34] In Bradbury, the Court of Appeal summarised the distinction between New Zealand’s three broad approaches as follows:19
(a)standard scale applies by default where cause is not shown to depart from the it;
(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and
(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[35] The Court of Appeal acknowledged that, in practice, scale costs had reduced to the point that they fell far short of a litigant’s actual costs. However, it said that was a matter for the Law Society’s Rules Committee. The Court then stated:20
… the starting point of our rules, which gives a one-third or thereabouts deduction from a set figure is comfortably in the modern main stream. It affords recognition of the access to justice factor that prevails in the United States and should not lightly be departed from. Clear cause must be shown to justify an increase. Our three stage classification, with a discretion in each class as to where the order should be pitched, accords with that approach. Indemnity costs, which depart from the predictability of the Rules Committee's regime, are exceptional and require exceptionally bad behaviour. That is why to justify an order for such costs the misconduct must be “flagrant” ...
[36] The Court of Appeal noted examples of cases where indemnity costs had been ordered:21
17 Rule 14.6(3)(b)(ii).
18 Rule 14.6(4)(a).
19 Bradbury v Westpac Banking Corporation, above n 13, at [27].
20 At [28].
21 At [29].
(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 … [the] “hopeless case” test [set out by French J in J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2)].22
[37] The Court observed that each of the above examples concerned conduct that would fall within r 14.6(4) of the Rules. It also observed that a sixth example, imprudent refusal of an offer of compromise, did not fall under the indemnity costs rule but may justify increased costs under r 14.6(3)(b) or (c).23
Analysis
[38] The essential question is whether, in terms of r 14.6(4), the plaintiffs acted vexatiously, frivolously, improperly or unnecessarily in bringing and maintaining this proceeding. I consider that question by reference to the grounds advanced by the defendants.
[39] I deal first with questions of whether Parklane was pursuing an ulterior purpose and the relevance of not taking up the settlement “offer”. I then consider whether Parklane’s case was “hopeless”.
22 J Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No 2)
[1993] FCA 70; (1993) 46 IR 301 at 303. In that case, French J stated:
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
23 Bradbury v Westpac Banking Corporation, above n 13, at [30].
Did Parklane use the caveat and the proceeding for an ulterior purpose?
[40] It is clear from the chronology of events set out in the Access Rights Judgment, that the lodging of the caveat was directly connected to Parklane’s effort to secure affected person status in relation to Trinity’s application for subdivision consent.24 However, despite Parklane’s efforts to be recognised as an affected person, the subdivision consent was granted on a non-notified basis and within two weeks of Trinity’s application that the caveat should lapse. By that date, Summerset had exercised its rights under its sale and purchase agreement with Trinity to take over Trinity’s subdivision consent application.25 In other words, any connection between this proceeding and Trinity’s desire to be recognised as an affected person for the purpose of Trinity’s subdivision consent and any influence that Parklane may have sought to exercise with respect to settlement of the sale of Trinity’s land to Summerset was incidental to, rather than causative of, Parklane bringing this proceeding.
[41] Given these circumstances, I do not accept that Parklane used the caveat and the proceeding for any ulterior purpose related to its aspiration for affected person status or to the agreement between Trinity and Summerset.
[42] Parklane’s desire to secure access rights over the Trinity land in order to bolster its position with respect to securing development rights to the ex-Fonterra land was not an ulterior purpose. Securing development rights in relation to the ex-Fonterra land was directly connected to and, indeed, was the reason for Parklane’s caveat which, in turn, was the basis of Parklane bringing the present proceeding. The fact that no such access rights were required in order to secure those development rights does not negate this purpose.
[43] Accordingly, I do not accept that the caveat and the proceeding were employed for ulterior purposes.
24 Access Rights Judgment, above n 1, at [105] – [106].
25 At [110] – [112]
Failure to accept the settlement “offer”
[44] Although cast as an offer, the proposal in the Tompkins Wake letter of 11 June 2021 was simply that Parklane agree to settle the proceeding on the basis that costs lie where they fall. The letter also stated:
The above in principle proposal is not capable of acceptance and is subject to the parties reaching agreement on all the terms in a formal settlement document and executing the same.
[45] Although Trinity’s counsels’ further memorandum stated the “offer” was not accepted, in its own terms the letter was not a settlement offer. Even if it had been, failure to accept an offer not to proceed with a proceeding on a “costs lie where they fall” basis, could not fairly be categorised as unreasonable where, as here, there was an objective basis for Parklane’s claim. Even if refusal of the “offer” had been imprudent, that would not have warranted indemnity costs, as confirmed by the Court of Appeal in Bradbury.26
Was Parklane’s case “hopeless”?
[46] The examples of situations where indemnity costs would be appropriate that were noted by the Court of Appeal in Bradbury included commencing or continuing proceedings in wilful disregard of known facts and making allegations which ought never to have been made.27
[47] I consider that, in registering and maintaining a caveat against the title to Trinity’s land, including in continuing this proceeding to enforce their asserted rights of access over Trinity’s land, Parklane acted in wilful disregard of known facts and made allegations that ought never to have been made.
[48] In its engagements with the defendants, Parklane was represented principally by Mr Cary, who acknowledged in cross examination that he was general manager of Parklane. It was clear from the evidence that Mr Cary acted with the knowledge and authority of Mr Price, who was Parklane’s sole director and shareholder as well as
26 Bradbury v Westpac Banking Corporation, above n 13, at [30].
27 At [29].
being Mr Cary’s father-in-law. There is no basis, therefore, for distinguishing between the knowledge of Parklane and that of Mr Cary.
[49] The principal issue in the proceeding was whether, on an objective analysis as required by the Supreme Court’s decisions in Firm PI 1 Ltd v Zurich Australian Insurance Ltd and Bathurst Resources Ltd v L & M Coal Holdings Ltd,28 the access letter and surrounding circumstances established that a contract had been formed.29 Strictly speaking, the subjective beliefs of Parklane and Mr Cary were not relevant to that analysis. However, as set out in the Access Rights Judgment, analysis of the events and communications leading up to preparation of the access letter, and preparation of the letter itself, established that a reasonable person, having all the background knowledge that would reasonably have been available to Mr Wu and Mr Cary, would not have considered that, in signing the access letter, Mr Wu intended to grant Parklane a legal interest in Trinity’s land.30
[50] Mr Cary had much more direct knowledge than that imputed to the objective reasonable person. Mr Cary knew Trinity had shown no interest in his various efforts to sign Trinity up to a confidentiality agreement and a memorandum of understanding or in the unsolicited Options for Green paper he had sent Mr Wu and Ms Zhang, Mr Wu’s business partner. Mr Cary knew Mr Wu had no intention of assigning rights over Trinity’s land for no value other than Mr Cary’s unsolicited proposal for Parklane “to attempt to implement” a back-up offer if Trinity’s deal with Summerset fell through. Mr Cary knew Trinity had not responded to the Davies Law letter of 11 February 2019 that had been sent to Tompkins Wake on Mr Cary’s instruction. Mr Cary also knew that Mr Wu had agreed to the access letter with considerable reluctance and had done so after Mr Cary told him that Parklane needed confirmation of access so it could confirm its appointment with the Ministry of Business, Innovation and Employment (MBIE) or Kiwibuild the following week when, in fact, no such meeting had been arranged. Mr Cary also knew that the changes that he and Mr Osmond made to the draft of the access letter to give it a more legal look and feel
28 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432, at [60]
– [63]; Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696,
at [43].
29 Access Rights Judgment, above n 1, at [132] – [133]
30 At [174] – [176].
were designed to make it appear that the access letter was doing more than Mr Wu ever intended it to do.
[51] In summary, Mr Cary, on behalf of Parklane, pressured Mr Wu to write the access letter and manipulated the language of the letter to make it appear that Trinity had granted Parklane formal access rights over its land when he knew Mr Wu had no intention of conferring legal rights on Parklane. To then assert that the letter conferred legal rights and to register a caveat against the title to Trinity’s land was improper and probably dishonest.
[52] For these reasons, I am satisfied that, in registering and maintaining the caveat and in continuing this proceeding, Parklane acted in wilful disregard of known facts and made allegations that ought not to have been made. Whether or not that made the proceeding “hopeless”, I am satisfied that Parklane’s behaviour was vexatious and flagrant and constituted “exceptionally bad behaviour” of the kind discussed by the Court of Appeal in Bradbury.
[53] The fact that Moore J sustained the caveat when Trinity applied for it to lapse does not alter the above assessment. As I observed in the Access Rights Judgment, Moore J did not have the benefit of extensive evidence and submissions on the communications prior to the letter.31 Once that information was before the Court, it was obvious that Mr Cary and Parklane had been using the Court’s processes to try to achieve legal rights to which they were clearly not entitled.
[54] For these reasons, I am satisfied that this is an exceptional case that warrants the award of indemnity costs.
[55] Even if it is not usual to assert privilege with respect to invoice narrations in a dispute over costs, I accept that the narrations are subject to solicitor-client privilege. On the basis of Ms Cornegé’s affidavit, I am also satisfied that the costs claimed by the defendants were actually and reasonably incurred.
31 At [148].
Result
[56] I order the plaintiff, Parklane Infrastruct Ltd, to pay the defendants’ actual costs in the amount of $245,906.60, including disbursements of $1,451.26.
G J van Bohemen J
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