Property Sales Direct Limited v Hawken Lane Development LP
[2022] NZHC 943
•5 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1435
[2022] NZHC 943
IN THE MATTER of the Companies Act 1993 and the Limited Partnership Act 2008 BETWEEN
PROPERTY SALES DIRECT LIMITED
Plaintiff/First Counterclaim Defendant
AND
HAWKEN LANE DEVELOPMENT LP
Defendant/Counterclaim Plaintiff
STEPHEN JOHN DAVIES
Second Counterclaim Defendant
Hearing: On the papers Appearances:
H Holmes for Plaintiff/First Counterclaim Defendant E St John for Defendant/Counterclaim Plaintiff
S Pasley for Second Counterclaim Defendant
Judgment:
5 May 2022
JUDGMENT OF HARVEY J
[Costs]
This judgment was delivered by me on 5 May 2022 at 4.00pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Counsel/Solicitors:
E St John, Barrister, Auckland Keegan Alexander, Auckland Heritage Law, Auckland
Robertsons Law, Auckland
PROPERTY SALES DIRECT LTD v HAWKEN LANE DEVELOPMENT LP - Costs [2022] NZHC 943 [5 May 2022]
Introduction
[1] By judgment dated 9 March 2022, the applications of Property Sales Direct Ltd (PSDL) for leave to serve a third-party notice on its former counsel and for separate trials were dismissed.1 As foreshadowed, the defendant Hawken Lane Development LP is entitled to costs and counsel have now exchanged memoranda in the absence of agreement over costs.2
[2] It is accepted that Hawken is entitled to costs as the successful party and to the sums claimed. However, PSDL seeks an order that either costs be shared between themselves and Mr Davies, or an order that PSDL and Mr Davies are jointly and severally liable. Mr Davies opposes those orders and instead seeks indemnity or increased costs for those costs incurred in responding to the plaintiff’s claim.
[3] Also relevant is a Notice of Discontinuance, dated 24 March 2022 and signed by all parties, which confirmed that Hawken discontinued its claim against the second counterclaim defendant, with no issue as to costs.
[4]Accordingly, the issues for determination are:
(a)Should Mr Davies be required to contribute to costs?
(b)Should costs be awarded for the preparation of the costs memoranda?
(c)Should Mr Davies be awarded increased or indemnity costs?
Hawken’s submissions
[5] On 22 March 2022, Mr St John for Hawken filed a memorandum seeking 2B costs of $7,050.50 and disbursements of $160. Hawken also seeks scale costs for the preparation of the costs memorandum. Counsel submitted that on 11 March 2022, a letter was sent to counsel for PSDL setting out its costs calculation and seeking agreement by 16 March 2022. However, there was no response. Accordingly, Mr St John argued that PSDL’s failure to cooperate to agree costs was inexcusable and
1 Property Sales Direct Ltd v Hawken Lane Development LP [2022] NZHC 403.
2 At [36].
that there should have been no need to waste the court and counsels’ time by requiring a judgment on costs.
PSDL’s submissions
[6] On 30 March 2022, Mr Holmes for PSDL filed a one-page memorandum in reply, acknowledging that it is not in dispute that Hawken is entitled to costs and agreeing with the sums calculated. However, counsel sought a direction that PSDL share liability for costs with Mr Davies, who they say joined the application and made submissions in support. Accordingly, an order was sought that the plaintiff was liable to the defendant for $3,525.25 and that Mr Davies was liable to the defendant for
$3,525.25. In the alternative, counsel seeks an order that PSDL and Mr Davies are jointly and severally liable for costs.
Mr Davies’ submissions
[7] By memorandum dated 7 April 2022, Ms Pasley for Mr Davies submitted that her client was no longer a party to this proceeding, and that he was surprised that the plaintiff now seeks a contribution of costs from him, notwithstanding its consent to the discontinuance on the basis that there was no issue as to costs. The memorandum
– stating that PSDL has sought Mr Davies’ contribution without providing the Court with any reasoned grounds, reference to the High Court Rules 2016 or principles, or relevant information to fully consider this matter – provided detailed submissions regarding the discontinuance and other issues with PSDL’s claim.
[8] Regarding the discontinuance, Ms Pasley contended that in circumstances where PSDL signed the Notice of Discontinuance on 24 March 2022, which stated that there was no issue as to costs with no reservation of rights, it is inappropriate that PSDL seek orders that Mr Davies share costs or otherwise be jointly liable.
[9] Moreover, Ms Pasley argued that she had written to counsel for PSDL on 31 March 2022 stating Mr Davies’ position and asking that PSDL withdraw its assertion that Mr Davies share costs. A copy of that email and PSDL’s reply was attached to the memorandum. In response to PSDL’s reply by email that the reference to costs in the Notice does not apply to liability fixed prior to the discontinuance,
Ms Pasley submitted that this is contrary to the plain wording of the Notice and that Mr Davies had no prior liability to either the plaintiff or the defendant in respect of costs, regardless of the Notice.
[10] If the Court finds merit in the plaintiff’s argument regarding the nature of the Discontinuance, Ms Pasley submitted that PSDL alone filed the interlocutory applications to which the judgment relates without waiting for Mr Davies to confirm instructions. Had Mr Davies brought the application, a different approach would have been taken, but as it was the Court correctly focussed on the plaintiff’s submissions in determining how to approach consideration of the applications. Citing Shirley v Wairarapa District Health Board, counsel argued there are no exceptional circumstances which justify a departure from the principle that “the loser, and only the loser, pays” and that in those circumstances, the orders sought by PSDL are unreasonable and not justified.3
[11] Finally, Ms Pasley sought costs from the plaintiff for the preparation of the costs memorandum. This is on the basis that Mr Davies could not have anticipated that, following discontinuance on the terms set out in the Notice, a situation would arise that would require further attention. Moreover, counsel submitted that increased or indemnity costs are appropriate because of PSDL’s conduct in:
(a)Failing to address the issue of costs in a timely manner when approached by the defendant;
(b)Failing to raise with Mr Davies or the defendant its intention to seek costs from Mr Davies prior to consenting to the discontinuance;
(c)Refusing to engage on the issues with the orders sought at any stage; and
(d)Failing to provide the Court with all information relevant to determination of the orders sought by the plaintiff.
[12] Ms Pasley submitted that if the Court agrees, then counsel will supply a schedule quantifying the actual costs incurred by Mr Davies in respect of the
3 Shirley v Wairarapa District Health Board [2006] NZSC 63.
plaintiff’s claim for a contribution for costs or, alternatively, scale costs with options for the Court to determine an appropriate uplift.
Discussion
Should Mr Davies be required to contribute to costs?
[13] As set out in r 14.1 of the High Court Rules 2016, costs are at the discretion of the Court. It is also a principle that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds,4 and that so far as possible the determination of costs should be predictable and expeditious.5
[14] Even putting the Notice of Discontinuance aside, I do not accept that Mr Davies is liable for costs against Hawken. This was not a joint application. It is correct that Mr Davies filed submissions in support of PSDL’s application. However, PSDL chose to bring the interlocutory applications alone, notwithstanding that Ms Pasley had confirmed at an earlier stage that Mr Davies might wish to join the application and that instructions were pending.
[15] Moreover, the focus of the judgment was firmly on PSDL’s submissions and approach to their own application.6 This included their submission that the application for separate trials would only be sought if the application for leave to serve a third- party notice was granted. In short, Mr Davies’ involvement and submissions made no material difference to the costs incurred by Hawken in opposing PSDL’s interlocutory application. The same result would have been reached without his input. I am satisfied that in this case there is no basis to depart from the principle that the losing party should pay costs to the successful party.
[16]Turning then to the Notice of Discontinuance, which states:
4 Rule 14.2(1)(a).
5 Rule 14.2(1)(g).
6 See for example Property Sales Direct Ltd v Hawken Lane Development LP, above n 1, at [9] –
[14] in which Mr Davie’s submissions supporting the joinder application were mentioned only once in the Court’s summary of counsels’ submissions.
THIS DOCUMENT NOTIFIES YOU THAT –
1. The counterclaim plaintiff discontinues its claim against the second counterclaim defendant.
2. There is no issue as to costs.
[17] The Notice was signed by all counsel and is dated 24 March 2022. No reservation of PSDL’s right to seek a contribution to costs from Mr Davies regarding the interlocutory application was made. Tellingly, PSDL signed the Notice of Discontinuance in circumstances where PSDL had been on notice since 11 March 2022, when Hawken sent PSDL a letter seeking agreement on costs, that Hawken was seeking costs against PSDL alone. In addition, PSDL had failed to take any steps with Hawken to agree costs. Further, PSDL had also failed to take any steps to notify Mr Davies that it was seeking a contribution from him in relation to the interlocutory proceeding prior to signing the Notice of Discontinuance.
[18] In all the above circumstances, I consider that it would be inappropriate for Mr Davies to be required to contribute to Hawken’s costs.
Should costs be awarded for the preparation of the costs memoranda?
[19] Notwithstanding some conflicting authorities,7 costs on costs are a matter of discretion for the Court.8 I consider that PSDL alone is liable for the costs incurred in relation to Hawken and Mr Davie’s engagement in this costs application, given their own lack of engagement in relation to costs matters. Regarding Hawken’s costs, in their memorandum of 30 March 2022, PSDL did not dispute Hawken’s claim that PSDL had failed to engage with Hawken at all to agree costs without involving the Court. In any event, PSDL has not disputed this claim for costs.
[20] Turning to Mr Davies’ claim for costs, there was a similar absence of engagement by PSDL with Mr Davies prior to PSDL’s memorandum that costs be
7 See Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [HRPt14.17(13)] in which the author considers the conflicting authority and is of the opinion that “the preferable view is that an application for costs is to be treated no differently for costs purposes from an ordinary interlocutory application”, citing Body Corporate Administration Ltd v Mehta (No 4) [2013] NZHC 213 at [85], affirmed in Strata Title Administration Ltd v Body Corporate Administration Ltd [2014] NZCA 96.
8 See Gibson v Official Assignee of New Zealand [2015] NZHC 3200 at [14].
shared. Moreover, PSDL’s claim for a costs contribution from Mr Davies, put to the Court in a brief memorandum, was unsupported by reference to authority or principle and gave no reasons for seeking such an order. It was entirely reasonable in those circumstances for counsel for Mr Davies to supply the Court with costs submissions and I consider they should not bear the cost of doing so.
Should Mr Davies be awarded increased or indemnity costs?
[21] Ms Pasley submitted that indemnity costs were justified on the basis that PSDL acted improperly and unreasonably by seeking a contribution from Mr Davies when he was no longer a party to the proceeding and by failing to place before the Court relevant information when seeking that contribution, including failing to alert the Court to the Notice of Discontinuance.
[22] In the alternative, Ms Pasley seeks increased costs on the basis that PSDL has contributed unnecessarily to the time and expense of the proceeding by bringing an argument that lacks merit, and also failing without justification to accept the legal argument that the Notice bars PSDL from seeking costs from Mr Davies or the argument that Mr Davies did not join in the applications by the plaintiff.
[23] Rule 14.6(4)(a) states that the court may 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. In addition, r 14.6(4)(d) provides that indemnity costs may also be awarded where the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it.
[24] Rule 14.6(3)(b) provides that the court may order a party to pay increased costs if the party opposing has contributed unnecessarily to the time or expense of the proceeding or a step in it by taking or pursuing an unnecessary step or an unmeritorious argument,9 or failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument.10 Regarding increased and indemnity costs, there is an overarching discretion of the court to award such costs if “some other
9 Rule 14.6(3)(b)(ii).
10 Rule 14.6(3)(b)(iii).
reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.”11
[25] Having considered counsels’ submissions, I am not persuaded that indemnity costs are appropriate here. There is at least an argument, albeit tenuous, that the Notice of Discontinuance reference to “no issue as to costs” concerned Hawken’s claim against Mr Davies rather than limiting any potential contribution claim by PSDL against Mr Davies for costs already incurred. However, in the end, I consider that the proper interpretation was that set out above, given that the two interlocutory applications were PSDL’s alone. As foreshadowed, my conclusion is that Mr Davies cannot be held liable for a contribution to the costs due to Hawken by PSDL.
[26] That said, the fact that PSDL seemed to disengage from dialogue with the other parties over costs was unhelpful in attempting to resolve the issue without further court involvement. At the risk of belabouring the point, the single page submission devoid of authorities was also counterproductive to the expeditious disposal of the costs application of Hawken. Mr Davies was then put to unnecessary expense engaging in the contribution argument. Accordingly, I consider it appropriate that a costs award of 2B costs with a 50 per cent uplift to Mr Davies for the preparation of the costs memorandum is warranted in these circumstances.
Decision
[27] Property Sales Direct Limited is ordered to pay scale costs of $7,050.50 and disbursements of $160 to Hawken Lane Development LP.
[28] Property Sales Direct Limited is ordered to pay Mr Davie’s costs of preparing the costs memorandum on a 2B basis, with a 50 per cent increase. I direct counsel for Mr Davies to file a schedule for scale costs for this purpose.
Harvey J
11 Rule 14.6(3)(d) and (4)(f).
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