Rocket Surgery Ltd v Goodwin

[2013] NZHC 2667

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

CIV-2012-412-000335 [2013] NZHC 2667

BETWEEN  ROCKET SURGERY LIMITED Plaintiff

ANDWAYNE ERNEST GOODWIN and MARY ELIZABETH GOODWIN Defendants

Submissions in writing:

Filed - 21 August 2013 (plaintiff)

- 5 September 2013 (defendant)
- 12 September 2013 (plaintiff)

- 18 September 2013 (defendant)

Appearances:           D P Robinson for the Plaintiff

A Beck for the Defendant

Judgment:                21 October 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to costs

[1]      The defendants seek costs on a discontinued proceeding.

[2]      The  proceeding,  in  relation  to  a  Mosgiel  property  (the  property),  was commenced by Rocket Surgery Ltd (RSL) with a summary judgment application.  In October 2012 I granted RSL judgment.1   That judgment was successfully appealed to the Court of Appeal by the Goodwins.2

The discontinuance of the proceeding

[3]      On 21 August 2013, the plaintiff discontinued this proceeding.  RSL had in the meantime, on  28  June 2013  commenced  a  new proceeding  for an  order of

possession of the property.

1      Rocket Surgery Ltd v Goodwin [2012] NZHC 2752.

2      Goodwins v Rocket Surgery Ltd [2013] NZCA 172.

ROCKET SURGERY LIMITED v GOODWIN [2013] NZHC 2667 [21 October 2013]

[4]      Rule 15.23 High Court Rules applies.  It provides:

15.23   Costs

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

RSL’s position on costs

[5]      Mr Robinson for the plaintiff sought a direction that there be no order as to costs.

[6]      He  referred  to  the  ruling  of  the  Court  of Appeal  on  costs.    Harrison  J, delivering the judgment, said:3

In the normal course costs would follow the event. However, while the Goodwins have been successful, we are satisfied that costs should lie where they fall. In our view, even though RSL’s claim was misconceived, this litigation has been generated and prolonged by the Goodwins’ failure to honour the spirit of a family arrangement. Sale of the property is inevitable and the Goodwins’ failure to recognise this inevitability has unnecessarily compounded the costs for both the parties.

[7]      Mr Robinson noted that this proceeding was discontinued because RSL was pursuing an application for possession in its new proceeding.  The purpose of that new proceeding was to enable the Court to resolve issues as to the respective rights of the parties once and for all.

[8]      Mr Robinson referred also to the judgment of Associate Judge Abbott in a related proceeding in which the Goodwins failed to obtain an order that a caveat which they had lodged against the title to the property should lapse.4    Associate Judge Abbott dismissed the Goodwins’ assertion of a continuing beneficial interest in the property.  His Honour held:5

Even if some latitude was possible (and it appears that the respondent did not start pressing for sale and recovery of its contributions for another year), there can no longer be any basis for the applicants’ case that the respondent still holds the property under that express trust. This finding does not require

3 At [30].

4      Goodwin v Rocket Surgery Ltd [2013] NZHC 2046.

5 At [27].

a determination of the dispute over the precise terms of the arrangement: it is based on the evidence provided by the applicant.

[9]      Mr Robinson concluded that the discontinued proceeding had arisen because of the Goodwins’ defaults and that the appropriate order was therefore that costs should lie where they fall.

Goodwins’ position on costs

[10]     Mr Beck,  for  the  Goodwins,  submits  that  there  is  no  justification  for departing  from  the  general  rule  (expressed  in  r  15.23)  that  a  plaintiff  who discontinues is liable for costs.  He submitted that the law has long disapproved of parties having more than one bite at the same cherry.   He submitted that that is particularly relevant where the second bite is done at the expense of the defendant.

[11]     Mr Beck refers to a range of factors considered relevant including that the plaintiff’s proceeding was not correctly formulated to achieve its goals; before discontinuing this proceeding the plaintiff had already commenced another proceeding; the costs involved in this proceeding are wasted costs; the plaintiff did not discontinue promptly; the plaintiff “strung the defendants along”; the plaintiff elected to use the summary judgment procedure in a situation where it was quite inappropriate; it was reasonable for the defendants to oppose the inappropriate procedure chosen by the plaintiff; and the discontinuance has contributed to further litigation.

[12]     Mr  Beck  noted  that  instead  of  amending  its  statement  of  claim  and proceeding to a hearing, RSL has decided to commence a fresh proceeding.   He submitted that those circumstances represent a classic case where the ordinary presumption under r 15.23 should apply.   He submitted that a party could not be permitted to take such action without bearing the costs consequences.

[13]     Mr Beck submitted that this was a case in which the Goodwins as defendants should have increased costs on the basis of a 50 percent uplift.

[14]     Mr Beck invoked r 14.6(3)(b)(ii) High Court Rules which permits the Court to order increased costs where a party has instituted a proceeding which lacks merit.

Mr Beck submitted that RSL commenced a misconceived proceeding; it amended its claim to include a claim that had no basis; and it took the step of applying for summary judgment in a situation where it was clearly not available.  Additionally, RSL vigorously opposed an application for stay of execution pending appeal, requiring the defendants to go to the Court of Appeal on an urgent basis to obtain a stay.

[15]   Mr Beck submitted that an order for increased costs would reflect the unnecessary litigation that had been imposed on the Goodwins costing thousands of dollars in a case which had no prospect of resolving the dispute between the parties. Mr Beck submitted a schedule of items from Schedule 3 showing a total costs claim of $31,491.75 (incorporating an uplift of 50 percent on a 2B scale award). Disbursements would total an additional $1,000.

The costs outcome in the Court of Appeal

[16]     I refer to the costs outcome in the Court of Appeal because it involves the same proceeding, albeit on appeal.  But, as reflected in the passage I have quoted6 the Court of Appeal ordered that costs lie where they fall by reason of the underlying merit or lack of merit of each side’s position.

[17]     The Court of Appeal allowed the appeal, setting aside the summary judgment and consequential relief.  In other words, the Goodwins succeeded in their appeal.

Determination of costs by an Associate Judge

[18]     After I had begun to consider this decision in relation to costs, counsels’

additional written submissions were filed (on 12 September 2013 and 18 September

2013 respectively).   Reference is made in those submissions to an email request made by Mr Beck for the defendant.  Mr Beck had requested that the Registrar refer

the costs submissions to “a Judge”.

6 Above [6].

[19]     It transpires that Mr Beck had intended to draw a distinction between an Associate Judge on the one hand and a Judge on the other.   In his subsequent memorandum Mr Beck has confirmed that position.  He has asserted:

The substantive proceeding never went to a hearing, and could not have been heard by an Associate Judge if it had…  Section 26I(3) of the Judicature Act confers on Associate Judges the power to deal with costs only in relation to matters  in  which  they  have  jurisdiction.     The  costs  of  a  substantive proceeding are for a High Court Judge to determine.

[20]     Mr Robinson for the plaintiff sought to invoke the provisions of r 14.9 High

Court Rules which provides:

14.9     Costs may be determined by different Judge or Associate Judge

Costs may be determined by a Judge or an Associate Judge other than the one who heard the matter to which the costs relate, if he or she is not available conveniently to make the determination.

[21]     Mr Robinson submits that r 14.9 empowers me to deal with the costs on the discontinuance because –

Associate Judge Osborne is seized of the matter and is fully acquainted with the file.  It is therefore proper for him to resolve issues of costs between the parties.

[22]     Mr Beck rejected Mr Robinson’s characterisation of my involvement.   He notes that the proceeding never went to a substantive hearing and, if it had, it could not have been heard by an Associate Judge.  He submits that therefore r 14.9 is of no application in the circumstances.

[23]     It  happens  that  I was  the  Judge  who  dealt  with  the  summary judgment application in this proceeding and had the case management of the proceeding subsequently.   But those matters do not of themselves inform the question as to whether as an Associate Judge I have jurisdiction to make a direction as to costs in relation to the discontinuance.

[24]     The general jurisdiction of Associate Judges is established by s 26I Judicature Act, with ancillary powers being defined in s 26IA and subsequent sections of the Act.

[25]     It is s 26IA which is directly relevant in this case.  It provides:

26IA    Ancillary powers of [[Associate Judge]]

(1)       Subject to subsection (2) of this section, [[an Associate Judge]] shall have, in all proceedings (including proceedings on an interlocutory application) properly before [[the Associate Judge]], jurisdiction to make any order or to exercise any authority or jurisdiction that might be made or exercised by a Judge of the High Court.

(2)       Nothing in subsection (1) of this section confers on [[an Associate Judge]] any jurisdiction or power of a kind described in subsection (3) or subsection (4) of section 26J of this Act.

[26]     The term “interlocutory application” is defined in s 2 of the Act in this way:

Interlocutory application—

(a)       Means  any  application  to  the  Court  in  any  civil  proceedings  or criminal proceedings or intended civil proceedings or intended criminal proceedings for an order or a direction relating to a matter of procedure or, in the case of civil proceedings, for some relief ancillary to that claimed in a pleading; and

(b)      …; and

(c)       …

[27]     In this case the plaintiff expressly seeks an order or direction under r 15.23 in relation to costs on a discontinuance.   Such is, in terms of the s 2 definition, an interlocutory application.   As such it is properly before me and I am entitled to exercise the jurisdiction that might be exercised by a Judge of the High Court.

The approach to be adopted

[28]     Rule 15.23 creates a presumption that a plaintiff who discontinues will pay costs to the defendant.   The presumption may be displaced if the Court finds that there are circumstances which make it just and equitable that the presumption should not apply.7

[29]     I adopt as applicable the observations made by Associate Judge Abbott in FM Custodians Ltd v Pati:8

7      North Shore City Council v Local Government Commission (1995) 9 PRNZ 182 (HC) at 188.

8      FM Custodians Ltd v Pati [2012] NZHC 1902 at [11] – [12].

[11]      The Court is not limited in the factors that can be taken into account when considering whether the presumption is displaced, but the following are matters which are taken into consideration:

(a)       As the general rule the Court will not consider the merits of the respective  cases  (unless  they  are  so  obvious  that  they  should influence the costs issue).

(b)      The Court will consider the reasonableness of the stance of both parties in the proceeding (whether it was reasonable for the plaintiff to  bring  and  continue  the  proceeding,  and  for  the  defendant  to oppose and continue to oppose it, up to the point of discontinuance).

(c)       Conduct  prior  to  the  commencement  of  the  proceeding  may  be relevant (for example, if any conduct by a defendant has precipitated the litigation), as may be the reason for discontinuing (for example, where a change of circumstances has made the proceedings unnecessary).

[12]      The Court’s general discretion in relation to costs can also override

the general principles in relation to discontinuance. (footnotes omitted)

Discussion

[30]     The observations of the Court of Appeal in refusing the costs of the appeal are pertinent.

[31]     The  central  objective  of  RSL  in  this  proceeding  (and  the  subsequent proceeding) has been to obtain the sale of the property.  In its judgment on costs the Court of Appeal focussed on the merits of RSL’s claim.  It found that the sale of the property was inevitable and that it  was the Goodwins’ failure to recognise that inevitability that  had  unnecessarily compounded  the costs  for both  parties.   Mr Beck’s submissions essentially invite the Court to focus on a lack of merit in the way RSL’s  case  was  pleaded  and  presented  in  this  proceeding.    But  precisely  that situation was recognised by the Court of Appeal (“RSL’s claim was misconceived”) when that Court ordered that costs on the appeal lie where they fall.

[32]     This is a case where the underlying merits of the respective cases  were obvious.

[33]     That said, when I examine the reasonableness of the stance of both parties in this proceeding (as required by the principles I have adopted), a distinction can fairly

be drawn between two stages of proceeding.  First, there is the point at which the Goodwins were required to respond to the summary judgment claim against them which they did so through filing formal opposition.  Secondly, there is the ensuing litigation as the parties brought to a hearing the dispute between them.   It was appropriate having regard to the time limits involved that the Goodwins took the formal steps to respond to the claim which they took.  The overall lack of merit in their position flavours the subsequent period of litigation rather than that initial point.

[34]     Accordingly, in my judgment the just and equitable outcome is that the costs of this proceeding should lie where they fall save in relation to the Goodwins’ filing of  their  opposition  (costs  and  disbursements)  and  their  appearance  at  the  first callover.   Those three items in the table which Mr Beck has provided correctly amount to $1,732.

Orders

[35]     I order:

(a)       In relation to this proceeding the plaintiff is to pay to the defendants costs and disbursements of $1,732;

(b)Save to that extent the costs and disbursements of the proceeding shall lie where they fall.

Associate Judge Osborne

Solicitors:

Gallaway Cook Allan, Dunedin

A Beck, Barrister, Wellington