Peegeecee Limited v Parkview on Hagley Limited

[2019] NZHC 701

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000676

[2019] NZHC 701

UNDER

the Property Law Act 2007

IN THE MATTER

of an application for cancellation of lease

BETWEEN

PEEGEECEE LIMITED,

RJSN PROPERTIES LIMITED, SULLIVAN ENTERPRISES (2007) LIMITED,
AB HOLDINGS (2007) LIMITED, KESWICK ENTERPRISES LIMITED, L&M HOLDINGS (2008) LIMITED, RUSSELL MACKIE AND SUZANNE MACKIE (T/A HAGLEY PARKVIEW PARTNERSHIP),

TRAVELLERS INN LIMITED, JAYA INVESTMENTS LIMITED,

ANKUR INVESTMENTS LIMITED AND M & A LIMITED
Applicants

AND

PARKVIEW ON HAGLEY LIMITED

Respondent

Appearances:

P Sills for the Applicants

G K Riach for the Respondent

Judgment:

4 April 2019

(Determined on the papers)

JUDGMENT OF OSBORNE J

(costs)

PEEGEECEE LIMITED v PARKVIEW ON HAGLEY LIMITED [2019] NZHC 701 [4 April 2019]

Introduction

[1]                 The applicants sought an order for possession of land (comprising units owned by the various applicants in a hotel property).

[2]                 The respondent cross-applied for an order granting relief against cancellation of the deed of lease in question.

[3]                 By this Court’s judgment, the application for an order for possession of land was dismissed whereas the cross-application for relief against forfeiture was granted, but on the basis of a series of conditions calculated to put right the breaches by the respondent which the Court found to be established.1

[4]                 The Court reserved costs but recorded a tentative conclusion that it is the applicants who should have costs and disbursements.2

The parties’ positions on costs

[5]                 The applicants seek costs on a 2B3 basis together with disbursements. Mr Sills had provided a correct calculation identifying 2B costs as totalling $15,164, together with disbursements of $3,100.

[6]                 Mr Sills accepts that there is no general rule that costs will be granted in favour of a lessor who has unsuccessfully opposed an application for relief against forfeiture. He submits nevertheless that, on the facts of this case, the nature of the indulgence granted to the applicants is such that they ought to pay the costs and disbursements. He submits that this is so for a number of reasons:

(a)the lease obligations breached by the respondent related to fundamental requirements of accounting and audit;

(b)the applicants made numerous requests for the financial information before resorting to the cancellation procedure;

1      Peegeecee Ltd v Parkview on Hagley Ltd [2019] NZHC 258.

2      Above n 1, at [128].

3      High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).

(c)the applicants provided draft orders which might reasonably have resolved the issues regarding provision of financial information;

(d)the respondent steadfastly maintained its refusal to provide information upon the basis of allegedly obtained legal advice (which was not produced in evidence); and

(e)this is not a case where the respondent has already remedied its breaches – the relief has been granted on terms requiring the remedy of breaches, which means that the application for possession may yet be restored for hearing.

[7]                 For the respondent, Mr Riach submits that this is an appropriate case to depart from the usual award of costs in favour of the lessor when relief is granted. He submits that the Court should make no order as to costs having regard to three matters:

(a)the respondent succeeded in obtaining relief against cancellation;

(b)the applicants failed in respect of issues which significantly increased the costs of the respondent and/or pursued an argument or arguments which lacked merit, a factor which should lead to reduction of costs pursuant to r 14.7 High Court Rules; and

(c)additionally, the costs of an unsuccessful interlocutory application pursued by the applicant (for a priority fixture) (calculated at $5,798) should be taken into account.

[8]                 Mr Riach noted (correctly) that the applicants had made a number of allegations of breach (beyond those which the Court found to be established) which were not established on the evidence. In relation to the breaches which were found to be established, Mr Riach noted the Court’s finding that the respondent’s director had a genuine belief as to the adequacy of the limited information he had supplied and the correct interpretation of the provisions of the lease requiring the availability of sourced documentation were not straightforward.

Discussion

[9]                 The approach which I must apply to consideration of costs in this situation is that identified by the Court of Appeal in Cunningham v Butterfield.4   There, Cooper J delivering the judgment of the Court said:

In our view the cases … should not be seen as establishing a general rule that costs will usually be granted in favour of a lessor who has unsuccessfully opposed an application for relief against forfeiture made by a lessee. While we accept that the cases temper the general rule that costs should follow the event, we do not consider that the position can be put on any more definite basis. Rather, what is required is a principled application of the rules. In cases such as this that may require an analysis of the facts to see what has given rise to the litigation, taking into account the conduct of the parties and whether one of them has contributed to its costs or engaged in other conduct that should influence the costs decision.

[10]            Here, the most appropriate characterisation of this case is that applicants established serious and unremedied breaches on the part of the respondent which entitled the applicants to cancel the lease as they had. The respondent has obtained relief only because the Court has been able to fashion conditions which should see the applicants’ contractual entitlements fully honoured (albeit very late). While the applicants did not establish breaches in relation to certain of the matters they had raised, by far the largest part of the two-day hearing was taken up with the breaches which were established.

[11]            An appropriate way of viewing the outcome in this proceeding is that the applicants needed to establish the correct interpretation of certain provisions of the lease in order to enforce compliance with the terms of the lease. The applicants have effectively been successful in obtaining what amounts to a declaration as to their entitlements. They are to be viewed in the round as the successful parties.

[12]            That leaves for consideration the interlocutory application (for a priority fixture) on which the applicants were unsuccessful. The costs of that application were reserved at the time, although Gendall J observed that, on its face, it would seem that the respondent would be entitled to an order for the costs of that application.5

4      Cunningham v Butterfield [2014] NZCA 213, (2014) 22 PRNZ 521 at [52].

5      Peegeecee Ltd v Parkview on Hagley Ltd [2018] NZHC 2558, at [11].

[13]            In response to the respondent’s now seeking to have those costs ordered,    Mr Sills simply submitted that, in the overall circumstances of this case (being the reasons he had set out), those costs should not be awarded against the applicant.

[14]            I do not find any reason to deny the respondent the costs order which would normally have been made in its favour pursuant to r 14.8 High Court Rules (in the absence of special reasons to the contrary).

[15]            Rule 14.8 (as observed by the Court of Appeal in Chapman v Badon Ltd), reflects the fact that the merits of particular applications and those of the substantive proceeding are different matters.6 I find no special reason to not allow the respondent the interlocutory costs.

[16]            Rule 14.17 requires that where opposite parties are awarded costs against each other their respective costs must be set-off and the lesser sum deducted from the greater. As the Court is dealing with both the substantive and the interlocutory costs at the same time, I will give effect to the set-off in the order I make.

Order

[17]            I order that in relation to the entire costs and disbursements of this proceeding, the respondent is to pay to the applicants the sum of $12,466.

Osborne J

Solicitors:

Hornabrook Macdonald, Auckland Counsel: P Sills, Barrister, Auckland Harmans Lawyers, Christchurch

6      Chapman v Badon Ltd [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].