Parklane Infrastruct Limited v Lu Trustee Limited
[2022] NZHC 233
•21 February 2022
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2020-419-000042
[2022] NZHC 233
BETWEEN PARKLANE INFRASTRUCT LIMITED
Applicant
AND
LU TRUSTEE LIMITED and HO NO. 2 TRUSTEES LIMITED
Respondents
Hearing: (On the papers) Counsel:
Peter Spring for the Applicant
Kate Cornegé and John Muggeridge for the Respondents
Judgment:
21 February 2022
[COSTS] JUDGMENT OF MOORE J
This judgment was delivered by me on 21 February 2022 at 12:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar / Deputy Registrar Date:
PARKLANE INFRASTRUCT LIMITED v LU TRUSTEE LIMITED & ANOR [2022] NZHC 233 [21 February 2022]
Introduction
[1] The respondents (together “Trinity”) were partially successful in their appeal of my decision that the applicant’s (“Parklane”) caveat over Trinity’s land not lapse. The Court of Appeal invited Trinity to apply to this Court for a reconsideration of my costs decision, in which I awarded Parklane costs on a 2B scale basis, together with reasonable disbursements.
[2] Trinity now applies for costs on a 2B scale basis, with an uplift of 50 per cent on steps taken after a settlement offer on 26 February 2020. Trinity’s position is that it succeeded in the proceeding following the appeal, and that increased costs are justified because Parklane’s refusal of several settlement offers put Trinity to additional expense.
[3] Parklane opposes the application. Parklane’s position is this Court should not disturb my initial costs award as Trinity’s appeal was advanced on largely different grounds to those relied on in this Court. Alternatively, Parklane opines that a modest discount (of 25 per cent) may be applied to recognise that the effect of the Court of Appeal’s decision was to sustain only a portion of the caveat.
Background
[4] The respondents, Lu Trustee Ltd and Ho No. 2 Trustees Ltd are partners in the Trinity Green Estate Partnership. Trinity owns land at 80 Laurent Road, Cambridge (“the Trinity land”). The Trinity land is made up of three lots:
(a)Lot 1 which is to vest in the local council for drainage;
(b)Lot 2 which is to be transferred to a third party (“Summerset”) under a conditional sale and purchase agreement; and
(c)Lot 3 which Trinity is to retain ownership of.
[5] In late 2018, Parklane approached Trinity about a possible joint venture which might include the development of the Trinity land. Parklane intended to make a
proposal to the Ministry of Business, Innovation and Employment and KiwiBuild about constructing a KiwiBuild development on adjoining land formerly acquired by the New Zealand Transport Agency (“the NZTA land”). The proposed development required access through the Trinity land. Discussions between the parties’ representatives culminated in Trinity signing a grant on 14 February 2019 which:
(a)expressed support for Parklane’s proposal to approach KiwiBuild to develop the NZTA land; and
(b)enabled Parklane to progress that proposal, and granted access across the Trinity land to allow roading and service access.
[6] During the parties’ discussions prior to the grant, Parklane was aware of Trinity’s intention to subdivide the Trinity land and sell Lot 2 to Summerset.1 Parklane subsequently lodged a caveat over the entirety of the Trinity land. Trinity became aware of the caveat on 13 December 2019 after being shown a letter from Parklane’s solicitors to Summerset. The caveat prevented Trinity from progressing the deal with Summerset.
[7] Litigation ensued. Parklane applied under s 143 of the Land Transfer Act 2017 (“the LTA”) for an order that the caveat not lapse. On 29 May 2020, I found that there was an arguable case that Trinity granted Parklane an equitable easement through the grant of access.2 I further found that the caveat was not defective for applying to the entirety of the Trinity land, rather than being limited to Lot 3.3 I considered that while, for the most part, access was contemplated as being through Lot 3, the final form of access could not be determined at that stage.4 I therefore ordered that the caveat not lapse.5 On 20 August 2020, I awarded Parklane 2B scale costs of $15,774 and disbursements of $734.63.6
1 As part of the deal Summerset would transfer a lot adjacent to Lot 3 (Lot 201) to Trinity. Lot 201 extends across Bourke Drive, a road which if extended could provide access to the NZTA land through Lot 3.
2 Parklane Infrastruct Ltd v Lu Trustee Ltd [2020] NZHC 1182 at [38].
3 At [39]–[42].
4 At [41].
5 At [50].
6 Parklane Infrastruct Ltd v Lu Trustee Ltd [2020] NZHC 2102.
[8] Trinity appealed. The appeal was on the narrow ground that there was no basis for the caveat to remain over the entirety of the Trinity land.7 The Court of Appeal found that road and service access to the NZTA land would only be constructed through Lot 3.8 The Court considered that there was never any possibility of road and service access to the NZTA land being constructed through Lot 2, as that lot was destined to be transferred to Summerset.9
[9] Trinity’s appeal was partially successful to the extent that the Court of Appeal found that there was no basis to sustain the caveat insofar as it extended beyond Lot
3.10 The Court set aside the order that the caveat not lapse.11 But the Court further ordered that the caveat not lapse until the sale and purchase agreement with Summerset settled, with Parklane being granted leave to lodge a further caveat over the title to the newly created Lot 3.12 In a Minute dated 12 April 2021, Cooper J remitted the issue of costs in this Court, noting that:13
“… the High Court Judge is best placed to make an assessment based upon the stance and arguments of the parties in that court about what impact this Court’s judgment should have on the costs order that he made. That assessment could take into account the fact that this Court’s order in effect contemplated that a caveat would not lapse in respect of a more limited part of the land affected by the caveat preserved by the High Court.”
Legal principles
[10] The Court has a general discretion as to costs.14 The long accepted starting point, however, is that “costs follow the event”15 and “the loser, and only loser pays”.16
[11] Issues of costs are commonly reconsidered in this Court following successful appeals.17 There are no set guidelines on how costs should be assessed by the initial Court where the initial Court’s ruling has been overturned by an appellate Court,
7 Lu Trustee Ltd v Parklane Infrastruct Ltd [2020] NZCA 682 at [31].
8 At [52].
9 At [41]–[52].
10 At [52].
11 At [64].
12 At [65].
13 Lu Trustee Ltd v Parklane Infrastruc Ltd CA354, 12 April 2020 (Minute of Cooper J) at [9].
14 High Court Rules 2016, r 14.1.
15 Crawford v Phillips [2018] NZCA 351 at [5]; and Baker v Hodder [2019] NZCA 270 at [12].
16 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].
17 Americhip, Inc v Dean [2015] NZHC 1871 at [25].
although applications are often treated as if the party who successfully appealed had also been successful in the lower court.18 A robust view is to be taken of success.19 Success in a proceeding includes “success on more limited terms”.20
[12] As I noted in my initial costs judgment, increased costs may be awarded where the unsuccessful party failed without reasonable justification to accept an offer of settlement.21 The onus is on the party claiming increased costs to demonstrate that the increase is justified.22 The reasonableness of a party’s rejection of an offer must be assessed at the time the offer was made. It will depend on the size and timing of the offer, the reasonable expectations of the party refusing the offer and on the parties’ ability, at the time of the offer, to assess the merits of the case.23
[13] An offer of settlement includes an offer under r 14.10 of the High Court Rules 2016. That is, a written offer that is expressly stated to be without prejudice except as to costs and that relates to an issue in the proceeding.24 The effect of such an order on the question of costs is at the discretion of the Court.25
Which party had the greatest degree of success in the proceedings?
[14] Trinity submits that, following the appeal, Parklane failed in the proceeding. It submits that Parklane applied for an order that the caveat not lapse, and that the caveat ultimately did lapse. Trinity further submits that it succeeded in the proceeding as it avoided the caveat preventing settlement of the deal with Summerset.
[15] Parklane submits that Trinity’s position in the High Court proceedings was unreasonable because it required the Court to determine disputed issues of fact in a manner inappropriate for the context in which those findings were sought. In the Court of Appeal, however, Trinity’s position differed in that it accepted that an arguable caveatable interest existed, but argued that that interest was limited to Lot 3. Parklane
18 LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2015] NZHC 1871 at [30].
19 Irwin v Mules [2021] NZHC 1457 at [6].
20 Weaver v Auckland Council [2017] NZCA 330 at [26].
21 High Court Rules 2016, r 14.6(3)(b)(v).
22 Strachan v Denbigh Property Ltd HC Palmerston North CIV-2010-454-232, 3 June 2011 at [27].
23 Samson v Mourant [2016] NZHC 1119 at [44].
24 Rule 14.10. Offers of this kind are often referred to as Calderbank offers.
25 Rule 14.11.
submits that Trinity’s position in the High Court proceedings was consequently not vindicated on appeal. It submits that the completion of the deal with Summerset was collateral to whether Parklane had a caveatable interest in the Trinity land. Parklane therefore submits that this Court’s original costs award should not be disturbed, and if it is disturbed, that it should be only by a modest discount, citing Middledorp v Avondale Jockey Club.26
[16] I am satisfied that Trinity succeeded in these proceedings, for the reasons which follow.
[17] First, it is apparent from the manner in which the parties advanced their cases in this Court that the result (after the appeal) favoured Trinity. Trinity emphasised in their submissions that settlement of the deal with Summerset “would be expected within a few weeks” but for Parklane’s caveat preventing transfer of Lot 2. Trinity submitted that that the caveat should lapse because Parklane’s interest was only in Lot 3:
“Lot 3 only (if there is to be a caveat)
34.The respondents’ primary submission is that the caveat should lapse, including because it should at most only be over Lot 3, for the reasons set out above. If the Court is minded to sustain the caveat, then the respondents say it should be removed from Lots 1 and 2, so as to enable the Summerset transaction to proceed.
35.The respondent submits that it is within the Court’s power to enable such an outcome. First, it is submitted that the Court’s broad power to order that caveats not lapse subject to conditions enables the Court to require the applicant to consent to the subdivision and transfer. If the Court does not consider that it has such jurisdiction, it is submitted that it would be open to the Court to order that the caveat lapse in full, with leave granted to applicant to lodge a second caveat over only that land that is to become subdivided Lot 3.”
(emphasis added)
26 Middledorp v Avondale Jockey Club Inc [2020] NZHC 1748.
[18] Parklane, on the other hand, argued that the caveat necessarily encompassed the entirety of the Trinity land given the (alleged) uncertainty whether access would be provided through Lot 3 or elsewhere:
“24.While confirmation has been received from Summerset that the deal it has with Trinity does involve the transfer of Lot 201, there is no certainty at present that this will actually occur, nor that the connection to Bourke Drive will be provided. Parkland also understands that both Summerset and Trinity have reserved their rights to object to the conditions, including condition 2(b),27 of the subdivision consent.
25.In their dealings ahead of the 14 February 2019 agreement, there were discussions between Trinity and Parklane about other access possibilities, including connections to Mary Ann Drive and Kerikori Way, and coming through from Lot 26, DP495847 (‘the Bourke Block’), as evidenced by annexures ”I”, “J” and “D” of Mr Cary’s first affidavit. The Bourke Block is also owned (or under purchase) by Summerset and is intended to be amalgamated with Lot 2 of the Trinity land subdivision.
26.It is within the power of Trinity (with Summerset) to ensure that the anticipated transfer of Lot 201 proceeds and to commit to the vesting of part of Lot 201 so that Lot 3 is not landlocked. However, without that certainty the only assured way in which the 14 February 2019 grant of access across the Trinity land to the ex-Fonterra block can occur is from Laurent Road. That route will become unavailable and potentially defeat Parklane’s right of access, if the subdivision and sale to Summerset proceed without the certainty that access over Lot 201 to Bourke Drive will be available.”
(emphasis and footnote added)
[19] Parklane’s submission that it was unclear which part of the Trinity land might be required for road access is obviously inconsistent with the Court of Appeal’s conclusion that the evidence did not justify a finding that road access could be provided at a number of points across the Trinity land. Further, Parklane was clearly concerned with protecting the caveat over the entire land as it submitted that Trinity’s deal with Summerset might defeat the right of access. Trinity, however, succeeded on its “primary submission” that the caveat was defective because it “should at most only be over Lot 3”.
27 Condition 2(b) of the subdivision consent provided that “no further development of Lot 3 be allowed until the proposed extension of Bourke Drive to the southern boundary of Lot 3 is vested as a public road or Lot 3 is amalgamated with Lot 201 DP 519601.”
[20] Secondly, Parklane’s application was ultimately unsuccessful. Parklane applied under s 143 of the LTA for an order that the caveat, in the form it was registered, not lapse. The application was for that particular caveat to not lapse – not for the retention of any caveat over the land. While the fact the Court of Appeal granted leave for Parklane to file a caveat over Lot 3 illustrates that it had a legitimate interest in the Trinity land, the application nevertheless failed.
[21] Thirdly, the Court of Appeal’s decision to effectively sustain part of the caveat is of limited significance. Had Parklane accepted that a less expansive caveat was appropriate, it instead could have partially withdrawn the caveat under s 144 of the LTA to limit it to Lot 3. A similar approach was contemplated by Trinity’s settlement offers. Parklane likely chose not to partially withdraw the caveat to restrict any developments that would limit the possible access routes through the Trinity land.
[22] For those reasons, I consider that Trinity succeeded in these proceedings. It is therefore entitled to costs on a 2B scale basis.
What is the appropriate quantum of scale costs?
[23] Trinity has included 11 claims for “Step 11 – Filing memorandum for first or subsequent case management conference or mentions hearing” in its calculation of scale costs. This includes claims for costs on the two costs memoranda it was required to file, one relating to my prior costs judgment and the other to this judgment. Trinity has further claimed an allowance for second counsel.
[24] Parklane submits that this calculation is incorrect. Instead, Parklane submits that an allowance for only two memoranda is appropriate, consistent with the calculation of costs in my original costs decision. Parklane further submits that no allowance should be made for second counsel.
[25] First, against the backdrop of Parklane filing only two memoranda, it is my view that Trinity’s claim for 11 memoranda would result in a costs order that is excessive. Some memoranda were particularly brief, barely extending over one page. On the other hand, the memorandum dated 27 April 2020 was extensive, seeking an interim order that was somewhat vindicated by the Court of Appeal. The actual costs
associated with the memoranda were not illegitimately incurred. In my view an allowance of two days results in a proportionate quantum of costs.. I specifically note that no allowance is made for costs memoranda. While the Court has power to award costs on costs matters, they are unusual and the Court is reluctant to award them.28
[26] Secondly, I am not satisfied that allowance should be made for second counsel. A category 2 case must have some exceptional feature to justify a second counsel allowance.29 In Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd, Chambers J considered that:30
“The approach is always objective and is focused on the nature of the proceeding, not the actual counsel involved and how he or she or they choose to conduct the litigation. Elders may well have received considerable value from having Mr Crossland as second counsel. That is irrelevant, however, to the question I have to determine, namely whether the nature of this proceeding, given the way the trial was conducted, was such as to justify requiring the losing party to contribute to the winning party’s cost in having a junior counsel present.”
[27] The approach to awarding costs for second counsel is objective. The proceeding was of ordinary complexity. There was no exceptional feature that justifies requiring Parklane to pay costs to Trinity for second counsel.
[28]I therefore calculate the appropriate quantum of 2B scale costs as $16,730.
Should there be an uplift on scale costs?
[29] Trinity submits that increased costs should be awarded as it made numerous settlement offers to Parklane. It submits that Parklane’s unreasonable failure to accept these offers put it to considerable additional expense.
[30] Parklane submitted that the settlement offers it rejected do not warrant increased costs. It submits that many of the offers were conditional on undertakings from Parklane and its principal (therefore requiring the assent of a third party), neither
28 Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137; Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; and Barry Park Investments Ltd v Body Corporate Number 95388 [2016] NZHC 1527 at [25].
29 Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2017] NZHC 1599 at [44].
30 Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC) at [21].
of which formed part of the Court of Appeal’s orders. Parklane therefore submits that had those offers been accepted, Trinity would have enjoyed a materially better position than it achieved in either court.
[31] The first without prejudice settlement offer which Trinity claims that Parklane unreasonably rejected is dated 26 February 2020. Trinity’s solicitors sent a letter to Parklane’s solicitors in which Trinity proposed that it would consent to an interim order sustaining the caveat pending further of the Court, on the basis that Parklane undertook:
(a)to execute a consent form to the subdivision plan;
(b)to provide an authority and instruction form authorising Trinity’s solicitors to register a partial withdrawal of the caveat over the area of Lots 1 and 2; and
(c)that there would be an undertaking by Parklane and its sole shareholder/director, Mr Price, as to damages and/or security as a condition of the interim order, including the provision of evidence of Parklane and Mr Price’s ability to satisfy an undertaking.
[32] Trinity repeated this offer on 6 March 2020. It appears from Trinity’s letter that Parklane had not advised whether it, or Mr Price, was willing to provide an undertaking as to damages and/or security by consent. Nor had Parklane or Mr Price provided evidence of their ability to do so.
[33] On 28 April 2020, Trinity made an open offer to Parklane. Among other things, the offer again proposed that Trinity would consent to an interim order that the caveat not lapse if Parklane partially withdrew the caveat so that it applied only to Lot 3. However, the offer contained other terms concerning the dealings between the parties more broadly. For example, Parklane would be required to agree to:
(a)not lodge a caveat over Lot 201;
(b)meet the cost of necessary consents under the Local Government Act 1974 relating to access; and
(c)meet the cost of works necessary to give effect to Parklane’s access rights.
[34] Trinity’s solicitors sent Parklane’s solicitors a second letter the following day on 29 April 2020 clarifying the terms of the offer. That letter stated that the offer was open for acceptance until 12:00 pm that day.
[35] On 6 May 2020, Trinity made its final offer to Parklane. Among other things, that offer also set out proposed terms relating to the parties’ dealings with Lot 201. It again required Parklane to agree not to caveat Lot 201, and to meet the cost of necessary consents under the Local Government Act 1974 relating to access.
[36] I am satisfied that Parklane’s rejection of these settlement offers does not justify an award of increased costs. The first two offers required the provision of security or an undertaking as to damages. Importantly, it not only required that from Parklane but also from Mr Price, who is a third party. Whether Mr Price could provide such an undertaking is unknown. In any event, an undertaking was not required by the Court of Appeal and in light of that it was not unreasonable for Parklane to reject the offers.
[37] The latter two offers both concerned the dealings between the parties more broadly than was considered in the proceedings. The offers included no caveat clauses over Lot 201 and required Parklane to meet the costs of consents and works to give effect to its access rights. At that time, it appears that the parties were yet to agree as to exactly how access would be facilitated and who would bear what costs. There is no evidence before me of what those costs might be. I am accordingly not in a position to assess whether this arrangement would be commercially favourable to Parklane. It therefore cannot be said that Parklane acted unreasonably in rejecting these offers.
[38] For those reasons, I am satisfied that Parklane did not unnecessarily contribute to the time and expense of the proceedings by rejecting Trinity’s settlement offers.
Result
[39] I order that Parklane is to pay Trinity costs on a 2B scale basis of $16,730, together with reasonable disbursements of $110.
Moore J
Solicitors:
Keegan Alexander, Auckland Tomkins Wake, Hamilton
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