Paros Property Trust Limited v Smith - [2022] NZHC 408

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2593

[2022] NZHC 408

BETWEEN
PAROS PROPERTY TRUST LIMITED

Plaintiff

AND

TIMOTHY ERIC BRUCE SMITH

First Defendant

TONI ADRIANNE SHAW

Second Defendant

Hearing: On the papers

Judgment:

9 March 2022

COSTS JUDGMENT OF HARLAND J

This judgment was delivered by me on 9 March 2022, at 3:30 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar Date:………………..

Counsel/Solicitors:
L McEntegart, Waterloo Tower Chambers, Auckland A Steel, Chancery Street Chambers, Auckland Brown Partners, Auckland

Copy to:
First Defendant; and Second Defendant

PAROS PROPERTY TRUST LTD v SMITH [2022] NZHC 408 [9 March 2022]

Introduction

[1] The substantive judgment for this matter addressed a dispute between the plaintiff landlord and defendant lessees over the interpretation of a clause in their lease which provided a right to freehold the property in certain circumstances. Paros Property Trust Ltd (Paros), the plaintiff, claimed for arrears of rent. The defendants claimed the lease had been determined by Paros’ refusal to allow them to exercise the right to freehold contained in cl 23, and that the lease had been cancelled upon acceptance of that repudiation.

[2] Judgment was delivered on 19 August 2021.1 I found that the defendants had not given Paros valid notice under cl 23, nor was there an agreement to vary the cl 23 process in relation to the notice to freehold. Further, I found that Paros had not repudiated or breached the lease and rental arrears were therefore payable by both defendants to Paros.2 Costs were reserved.3

[3] The parties have not reached agreement on costs and Paros and Mr Smith have filed memoranda. The second defendant, Ms Shaw, has not filed any memorandum in relation to costs.

[4] Paros seeks indemnity costs from the defendants pursuant to the lease, as well as disbursements. Mr Smith has appealed the judgment,4 and requests this Court to reserve determination of the issue of costs pending the appeal. Further, he submits that an award of indemnity costs to Paros would be unreasonable, but accepts costs on a 2B basis are appropriate, subject to two adjustments to Paros’ proposed schedule of the costs that would be payable on that basis.

[5]The issues for me to determine are:

(a)Should costs be reserved pending the appeal?

1 Paros Property Trust Ltd v Smith [2021] NZHC 2163.
2 At [20].
3 At [107].
4 Notice of appeal filed 13 September 2021.

(b)If not, should costs be awarded on an indemnity or 2B basis; and if the latter, should the adjustments sought by Mr Smith be allowed?

Issue 1: Should costs be reserved pending the appeal?

[6] Mr Smith’s appeal does not automatically operate as a stay of this proceeding, requiring me to reserve this decision.5 Nor is there any principle of law requiring a Judge to reserve costs pending the outcome of another aspect of the same proceeding, let alone an appeal.6 However, the Court does have discretion to do…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 408
Decision Date: 9 March 2022

CaseChat Overview and Summary

Paros Property Trust Limited sought a determination of rental arrears from the defendants, Timothy Eric Bruce Smith and Toni Adrianne Shaw. The substantive judgment addressed the interpretation of a clause in the lease which provided a right to freehold the property in certain circumstances. The defendants claimed the lease had been determined by Paros’ refusal to allow them to exercise the right to freehold contained in cl 23, and that the lease had been cancelled upon acceptance of that repudiation. The court found that the defendants had not given Paros valid notice under cl 23, nor was there an agreement to vary the cl 23 process in relation to the notice to freehold. Further, the court found that Paros had not repudiated or breached the lease and rental arrears were therefore payable by both defendants to Paros.

The court considered whether costs should be reserved pending the appeal, whether costs should be awarded on an indemnity or 2B basis, and whether the adjustments sought by Mr Smith should be allowed. The court found that the balancing exercise tipped entirely in favour of Paros’ rights to the fruits of the judgment and declined to reserve costs. The court found that the clause in the lease enabled Paros to claim indemnity costs against the defendants, however, the court found that the total costs claimed when compared to the amount in issue was not reasonable and ordered costs on a 2B basis. The court found that the case did not justify the involvement of second counsel at all stages and ordered that Paros may only claim costs for one of the statements of defence in response to the counterclaims. The court ordered that the defendants pay costs to Paros in the sum of $54,014 and disbursements as outlined in the Schedule 4 to counsel for Paros’ memorandum dated 2 September 2021.

Orders