Philpott v Noble Investments Limited

[2013] NZHC 830

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-002984 [2013] NZHC 830

IN THE MATTER OF     Caveats Numbers 8322656.1 and

8003770.1

BETWEEN  SHAYNE PHILPOTT, NEW ZEALAND TRUSTEE SERVICES LIMITED, COLIN PETER STOKES, FAY EUNICE RICHARDSON, BURNSIDE TRUSTEES LIMITED AND GREGORY ROBERT SMITH

Applicants

ANDNOBLE INVESTMENTS LIMITED Respondent

Hearing:         18 April 2013

(Heard at Christchurch)

Appearances: W J Palmer/J D Silcock for Applicants

S M Dwight for Respondent

Judgment:      18 April 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to costs]

[1]      In previous judgments in this proceeding, I determined initially an application for orders that caveats not lapse1 and then competing applications for supplementary orders.2

[2]      In delivering both judgments I had reserved costs.

1      Philpott v Noble Investments Ltd [2012] NZHC 1431.

2      Philpott v Noble Investments Ltd [2013] NZHC 400.

PHILPOTT V NOBLE INVESTMENTS LIMITED HC CHCH CIV-2010-409-002984 [18 April 2013]

The proceeding itself

[4]      The applicants had caveated the respondent’s title.   The applicants, in late

2010, received notice that the respondent had triggered the caveat-lapsing procedure under s 145A Land Transfer Act 1952.   The applicants therefore commenced this proceeding in order to sustain their caveats.

[5]      There  were  delays  in  the  litigation  caused  in  part  by  the  Christchurch earthquakes but also by commercial negotiations between the parties.  In the absence of resolution, the proceeding first came before me for hearing on 9  May 2012 resulting in my first judgment of 28 June 2012.  I concluded that the caveators had established a reasonably arguable case in relation to each caveat.  I found in relation to one caveat that there was a way in which the respondent could satisfy its obligations and therefore imposed conditions by which the first caveat could lapse. The second caveat did not lend itself to a directly parallel approach – I attached conditions to the order preserving that caveat.  The conditions gave the respondent the right to demonstrate that the applicants’ interest had been subsequently protected.

[6]      Leave was reserved to the parties to apply in relation to some aspects of the first judgment.

[7]      The first judgment was subsequently met by cross-applications filed by the parties.  Those applications were heard on 13 and 14 February 2013 leading to the second judgment (dated 5 March 2013).   In the second judgment, I ordered four amendments to the first judgment but otherwise dismissed a number of each parties’ applications.

The applicants’ position

[8]      The applicants seek costs in relation to both hearings.  Specifically they seek Scale 2C costs or alternatively Scale 2B costs with a 50 per cent uplift in respect of both judgments.

The respondent’s position

[9]      The  respondent  opposes  the  making  of  costs  orders  in  favour  of  the applicants. The respondent submits that costs should lie where they fall in relation to the first hearing and the first judgment and that the respondent should have costs on the second hearing and the second judgment on a 2B basis.

Principles

[10]   Counsel generally referred to similar principles as applicable to the determination  of  costs  principles  but  identified  for  emphasis  some  specific principles.  The following, which are all applicable principles under the High Court Rules, cover the matters on which counsel presented submissions:

(a)       Costs are ultimately within the discretion of the Court: r 14.1;

(b)The party who fails with respect to a proceeding should pay costs to the party who succeeds: r 14.2(a);

(c)       An award of costs should reflect the complexity and significance of the proceeding: r 14.2(b);

(d)An appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable: r 14.2(d);

(e)      So far as possible the determination of costs should be predictable and expeditious: r 14.2(g);

(f)      Increased   costs   may   be   justified   under   r   14.6   in   identified circumstances where the Court is justified in making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

Discussion

[11]     As reflected in the competing positions adopted by the parties in relation to costs, counsel take differing views as to the correct description of the outcome at each hearing.

[12]     It is necessary to stand back and to realistically assess what occurred.

[13]     The first hearing resulted in the caveators’ (the applicants) satisfying the Court that they had reasonably arguable cases in relation to both caveats.  That was the issue to be determined, and the applicants succeeded on it.  The conditions which attached to the first judgment were conditions provided as an exercise of the Court’s discretion with a view to creating a path by which the respondent could otherwise (that is otherwise than by leaving the caveat in place) protect the caveators’ interests.

[14]     This is a clear case in which to apply the normal rule that costs should follow the event, at least to the point of the first judgment.

[15]     Ms  Dwight,  for  the  respondent,  pointed  to  aspects  of  the  applicants’ arguments at the first hearing on which they were not successful, or not fully successful.   The hearing was not a long one.   While it is correct that not all the applicants’ arguments  found  favour  with  me,  the  most  important  aspect  of  the outcome is that there were orders that the caveats not lapse (albeit with conditions).

[16]     I will return below to the level of costs up to the first judgment.

[17]     In the meantime, the renewed applications led to the second hearing and the second judgment.

[18]     Mr  Palmer,  for  the  applicants,  has  reminded  me  that  I  have  previously referred to the second hearing as effectively a resumption of the first hearing. That is so, but it proceeded on the basis of further applications seeking amendments to the orders made in the first judgment and seeking further orders.   While some amendments were made at the behest of both parties, some of the competing applications were also dismissed.   Standing back, the fairest view is that neither party can be categorised as the successful party at the second hearing.

[19]     I am satisfied that costs should lie where they fall on the new applications, that is to say there should be no costs order.

Scale costs or increased costs?

[20]     An observation I made in the second judgment indicates the extent to which this caveat proceeding expanded between the first hearing and the second hearing.  I observed:3

The   2012   hearing   was   the   parties’   opportunity   to   provide   their comprehensive evidence and to have the Court determine (in the “arguable” jurisdiction) the fate of the caveats. In mid-2012, the Court gave its final judgment  on  the  parties’  caveat  issues.  The  hearing  of  the  present applications is not the opportunity for the parties to revisit the 2012 findings as if by some form of review or appeal, upon the basis of supplementary evidence or suggestions which could have been brought forward in 2012. Time has been available and continues to be available to the parties to assert their substantive rights and establish those through an ordinary proceeding upon evidence in the ordinary way. To date, the parties have chosen not to take that route. Instead, the Court is asked in some areas to review its factual findings in a fundamental manner and to alter the outcome of the 2012 judgment.

[21]     The 2012 hearing and judgment proceeded on what might be considered a normal amount of material in a caveat-lapsing context.  While a number of issues

3      Philpott v Noble Investments Ltd, above n 2, at [27].

were involved, it was not to that point a proceeding involving great volume or great complexity. The length of the hearing was a reasonable reflection of that.

[22]     The submission of Mr Palmer that I should award costs on a 2C basis rather than a 2B basis proceeds by reference to r 14.5(2)(c) upon the basis that a comparatively large amount of time for particular steps is considered reasonable.  Mr Palmer partly puts this down to the way in which the respondent challenged “almost every aspect of the caveatable interests asserted”.  He submits that the applicants had no choice but to approach the task in the detailed and comprehensive way that they did.

[23]     There were a number of issues raised by the respondent.  There is nothing particularly unusual in that.  It is for the caveators (the applicants) to establish the various points that make their caveat arguable.  More importantly, on my perception of the argument and of the hearing this did not lead to a much greater requirement of time for the steps to the first judgment.

[24]     On my assessment, Band B is appropriate as reflecting the normal amount of time which was reasonable in this case.

[25]     Both  counsel  have  accepted  that  this  is  a  Category  2  proceeding.     I accordingly consider (unless increased costs were to apply) that a 2B award up to the first judgment is appropriate.

[26]     It is then necessary to briefly comment on the suggestion that there should be increased costs (which Mr Palmer said should be calculated by reference to a 2B award with a 50 per cent uplift).   The way in which Mr Palmer arrived at a submission as to increased costs is itself interesting.   An award on a scale basis (albeit 2C) was what Mr Palmer described as the applicants’ preferred outcome.  He then submitted, in the alternative (if the Court was not prepared to proceed on the preferred outcome basis), that costs should be awarded with a 50 per cent uplift on a

2B award.   That is to say he was submitting that there should be an award of increased costs.  He invoked one particular ground for increased costs, namely that provided in r 14.6(3)(b)(ii), which allows increased costs where a party has taken or

pursued  an  unnecessary  step  or  an  argument  that  lacked  merit.    Mr  Palmer’s

emphasis was on the alleged lack of merit of some arguments.

[27]     I refer to my first judgment.  While I held against the respondent on a number of  its  arguments,  I  do  not  view  those  as  so  unmeritorious  as  to  engage r 14.6(3)(b)(ii).  Rather, I put those arguments in a category of arguments which did not succeed.  As a result costs should follow for each step involved (such as preparation for hearing and the hearing itself) in the normal way and not on an increased basis.

[28]     I therefore decline the application for increased costs up to the first judgment.

The calculation of a 2B award

[29]     Having reached the point that there is to be a 2B award, the Court is then confronted with somewhat different calculations.  Mr Palmer initially calculated that a 2B award should amount to $20,696.   Ms Dwight calculates that a 2B award should amount to $11,468.   (There is no dispute as to the single  disbursement, namely the filing fee of $400).

[30]     The initial difference between counsel was the application of a daily rate. The stage of the proceeding we are dealing with culminated in a judgment on 28

June 2012.  The current appropriate daily recovery rate under Schedule 2 of the High

Court Rules of $1,990 was substituted for the previous figure of $1,880 as from 14

June 2012.  Mr Palmer does not explain why he has completed his calculations at the higher rate and I take it to be an oversight.  The appropriate rate is clearly the rate which  applied  at  the relevant  time, namely $1,880.    In  this  regard  I  adopt  the approach of Associate Judge Abbott in FM Custodians Ltd v Pati.4

[31]     In a Reply Memorandum filed by Mr Palmer, the applicants accepted that the daily rate of $1880 was to be applied, reducing their costs claim to $18,800.

4      FM Custodians Ltd v Pati [2012] NZHC 1902 at [39].

[32]     I then turn to discuss the individual items claimed by the applicants.  I do so by reference to what each counsel appended to their submissions as “Schedule A”. Attached to this judgment are the applicant’s schedule (Schedule 1) and the respondent’s schedule (“Schedule 2”).  (In the case of Mr Palmer, Schedule 1 is what he provided in his Reply submission, being a claim reduced from what had been initially submitted).

[33]     Using the item number from Schedule 3 of the High Court Rules, and with

particular reference to the applicant’s schedule (Schedule 1) I review the items:

37 – the appropriate time allocation is two days as claimed.

10 – the applicants claim for preparation for a case management conference. There was no case management conference.  The hearing on 24 January 2011 was a first mention date.  Preparation was not required or allowed for in the Rules.

12 – the applicants claim 0.3 days for appearance at a mentions hearing whereas the allocated part-day under Schedule 3 is 0.2 days.

29 – the sealing of the interim order is properly allowed at 0.2 days.

11 – the applicants seek 0.4 days for a joint memorandum of 20 May 2011 seeking consent orders for vacation of a fixture (following the Christchurch earthquake and resulting difficulties with files).   Ms Dwight, for the respondent,   appeared   to   overlook   this   item   in   her  response.      It   is appropriately to be allowed.

11 – the applicants seek 0.4 days for the filing of the memorandum on 7

February 2012 in relation to timetable orders.   Ms Dwight appropriately accepts that allocation.

12 – the applicants seek 0.2 days for an appearance at a call-over, which the respondent appropriately accepts.

30 – this is the applicants’ largest single item.  Item 30 of Schedule 3 relates to the preparation of a party’s briefs or affidavits by way of trial preparation. The applicants claim for additional affidavit filed (following the substantial passage of time after the earthquakes  and  reply affidavits).   Ms  Dwight objects to any allowance under Item 30.   The items usually relevant to an originating application, as reflected in the applicants’ beginning with Item 37, are those set out in Items 37-43 under “Originating Applications”.  It is not appropriate to resort to Items 31-36 which relate to trials of ordinary proceedings.  This is a case, however, where the reply evidence required as a result of the extent of the respondent’s evidence puts the attendance into a different category which should not be ignored.  There is no specific item for reply  evidence.    That  is  unsurprising  as  reply  evidence  will  usually  be modest.  In this case, as Schedule 3 does not provide an item, I am required to determine reasonable time by analogy with the Schedule: r 14.5(1)(b). Having regard to the extent of reply evidence and further evidence filed, a reasonable allocation is one day.

40  –  the  applicant  is  entitled  to  Item  40  for  preparation  of  written submissions.

41 – the applicants are entitled as they claim to preparation of the bundle for the hearing.

42 – the applicants are entitled as they claim to appearance of principal counsel at the hearing (measured as one day).

43 – the applicants seek certification of second counsel and an allowance of Item 43.  This is not a case in which I consider it appropriate to certify the second counsel.  Item claimed Item 43 will not be allowed.

Resulting calculation

[34]     The costs which I therefore allow on a 2B basis are:

37 -  $3,760.00

12 -  $376.00

29 -  $376.00

11 (20.5.2011) -  $752.00

11 (7.2.2012) -  $752.00

12 -  $376.00

30 (one day) -  $1,880.00

40 -  $2,820.00

41 -  $1,128.00

42 -  $1,880.00

Total 2B costs  $14,100.00

Allowable disbursements

Filing fee for Notice of Originating Application           $400.00

Total disbursements  $400.00

Order

[35]     I order:

(a)      In relation to this proceeding up to 28 June 2012 the respondent is to pay to the applicants costs in the sum of $14,100 and disbursements in the sum of $400.00;

(b)In relation to this proceeding after 28 June 2012 there is no order as to costs or disbursements.

Solicitors:

Buddle Findlay, PO Box 322, Christchurch 8140

Cavell Leitch Pringle & Boyle, PO Box 799, Christchurch 8140

*SCHEDULE 1

SCHEDULE 2