Rohits Civil & Infrastructure Limited v China Construction Bank (New Zealand) Limited

[2018] NZHC 1194

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2519

[2018] NZHC 1194

BETWEEN

ROHITS CIVIL & INFRASTRUCTURE LIMITED
Plaintiff

AND

CHINA CONSTRUCTION BANK (NEW ZEALAND) LIMITED

Defendant

CIV-2017-404-2558

BETWEEN

CLARK ROAD DEVELOPMENTS LIMITED

Plaintiff

AND

ROHITS CIVIL & INFRASTRUCTURE LIMITED

First Defendant

CHINA CONSTRUCTION BANK (NEW ZEALAND) LIMITED

Second Defendant

Hearing:

On the papers

Counsel:

S Robertson for Rohits Civil & Infrastructure Ltd

A E Murray and J Thain for China Construction Bank (New Zealand) Ltd
K F Gould for Clark Road Developments Ltd

Judgment:

25 May 2018

COSTS JUDGMENT OF MUIR J

This judgment was delivered by me on Friday 25 May 2018. At 12.00 pm Pursuant to Rule 11.5 of

the High Court Rules.

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

ROHITS CIVIL & INFRASTRUCTURE LIMITED v CHINA CONSTRUCTION BANK (NEW ZEALAND) LIMITED [2018] NZHC 1194 [25 May 2018]

Introduction

[1]    On 20 November 2017 I gave judgment for Rohits Civil & Infrastructure Limited (RCI) in two related proceedings with the result that in proceedings CIV- 2017-404-2519 I granted summary judgment against China Construction Bank (New Zealand) Ltd (CCB) for $600,000 and in proceedings CIV-2017-404-2558 I declined an application for injunctive relief by Clark Road Developments Ltd (CRDL).

[2]    The related proceedings arose out of a construction bond given by CCB, payment under which CRDL sought to join. I reserved costs in the event they could not be agreed while making certain provisional observations which I hoped might assist the parties in coming to a negotiated settlement. Regrettably they have not been able to. Their disputes are numerous.

[3]    Regrettably also their various memoranda as to costs, which were filed in December 2017, were not forwarded to me until 23 May 2018. I have endeavoured to give judgment as promptly as possible.

[4]    I start by considering the “big picture” issues raised on the respective memoranda. I will then deal with the line item disputes.

Claim for increased costs

[5]    RCI claims increased costs. Consequent on the provisional views expressed in my judgment it does not pursue a claim for indemnity costs as it did in its submissions for the substantive hearing.

[6]    It says that a claim for increased costs is justified having regard to r 14.6(3) and, in particular, because CRDL and CCB pursued arguments that lacked merit and failed to accept a settlement offer and because of CCB’s default in terms of one of the Court’s directions.

[7]    The settlement offer was simply a demand that CCB make payment under the bond. I do not accept that this constitutes a settlement offer for the purposes of the Rules. It is analogous to provision of a detailed letter designed to stop litigation and

save further costs, rejection of which has been held not to constitute a failure to accept an offer of settlement under r 14.6(3)(b)(v).1

[8]    As to the merits, RCI says that the position under the bond was clear and that CCB had no defence to the summary judgment application and CRDL no basis to seek an injunction against payment.

[9]    Although CCB filed a notice of opposition to the summary judgment application, it ultimately abided the Court’s decision in that respect. Nor did it take any steps in relation to the injunction proceedings. Effectively it left carriage of the arguments under the bond to CRDL. I do not, however, accept RCI’s position that this evidences the fact that the case was a hopeless one from CCB’s (or indeed CRDL’s) perspective. In the circumstances, CCB’s decision to abide and to leave the argument to CRDL was unexceptional and does not itself reflect on the quality of the overall “defence” position. As I said in my judgment, the two applications were in many ways the “mirror image” of each other.

[10]   In that judgment I discussed in detail the law applicable to performance bonds. I identified that they are typically treated as, in substance, promissory notes and that the obligation of a Bank is entirely independent of the ultimate contract between account party and beneficiary. However, the bond must still be considered in its terms and in this case it was argued by CRDL that it was null and void as a result of CRDL having already paid the “Contract Price” to RCI.

[11]   That argument in turn involved an assessment of what was the “Contract Price”. CRDL submitted that it was the amount identified by the engineer as payable for work completed. Because the engineer had certified an overpayment it said that all obligations under the bond were at an end. I ultimately rejected that argument although noting that, in the context of a measure and value contract, there were some “complexities” in identification of what constituted the Contract Price. I held that what the engineer identified as the Forecast Contract Sum represented the Contract Price for the purposes of both the construction contract and the bond.

1      Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676, 13 July 2009 at [13].

[12]   It would, in that context, be wrong to describe the CRDL’s position (or CCB’s failure to make immediate payment under the bond) as premised on a “hopeless” case. Nor am I prepared to accept that for the purposes of r 14.6(3)(b)(ii) its position “lacked merit”. Meritoriousness in the r 14.6 context cannot simply be equated with ultimate success or failure in the litigation. Were it otherwise awards of increased costs would be routine when they are clearly intended to be exceptional. Nor do I consider it appropriate to award increased costs simply because the dispute arose in the context of a performance bond. The question must be whether there was a reasonable argument for non-payment under the bond. In this case there was such an argument, albeit one which I rejected.

[13]   Rule 14.6(3)(b)(ii) is primarily directed to pursuit of individual steps or arguments within proceedings which exacerbate the winning parties’ costs. If applied to the whole of the claim or defence then the lack of merit must be so obvious and incontrovertible that there is no possibility that the Court might form a different view on the basis of all evidence and submissions.2 The present case was not, in my view, in that category. At one level, the prospect that the Contract Price should be interpreted to mean the amount certified by the engineer as payable for the work completed had the appeal of preventing possible overpayment to RCI. But analysing the phrase within its full context I considered such a construction to be unavailable. In the result, the bond was not in my view null and void. This was no more nor less than a standard commercial dispute in the context of which a loss should not automatically be equated with “lack of merit” for r 14.6(3)(b)(ii) purposes.

[14]   As to compliance with court directions, I accept that CCB did not file submissions by the date specified in Wylie J’s Minute of 27 October 2017 and then only notified an intention to abide on the morning of the hearing. I accept therefore that there was a failure on the part of CCB to comply with a direction of the Court under r 14.6(3)(b)(i). But only to the extent such failure contributed to the time or expense of the proceeding is it relevant for r 14.6 purposes.3 RCI says it had to prepare on the basis that “the summary judgment would be defended in full” and that as a

2      N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [97] and [108].

3      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

result “it unnecessarily incurred additional costs”. But that seems unlikely. It would have still faced the full force of CRDL’s argument on the interim injunction which would have required the same level of attention, in respect of the same issues as engaged on the summary judgment claim.

[15]I decline therefore the application for increased costs

Approach otherwise to costs

[16]   I accept RCI’s submission that the appropriate approach is to make separate costs orders on the summary judgment and injunction applications but to make an allowance for the fact that there was substantial overlap in relation to a number of line items sought in the respective applications. RCI proposes that such “overlap” be dealt with by allowing a 2A allocation in respect of such steps with a 2B allocation reserved for those steps discrete to each set of proceedings. I consider that a fair and reasonable approach, reflecting the fact that Band A allocations in Schedule 3 to the Rules are in many instances set at or about 50 per cent of Band B allocations.

[17]   I have made some minor adjustments to this basic approach where I regard it as necessary. These are reflected in footnotes 4, 5 and 6 to this judgment.

The line item disputes

[18]I start with the summary judgment proceedings.

(1)Item 1 Commencement of proceedings

[19]   CRDL says that there should be no allowance for commencement of proceedings because this was an interlocutory application. But the interlocutory application was for summary judgment which resolved proceedings necessarily commenced with a statement of claim. I allow costs for Item 1 on a 2B basis. I note that CCB accepts this claim.

(2)Item 10 Preparation for first case management conference

[20]There was no such conference. I disallow the claim.

(3)Item 15 Issues conference

[21]There was no such conference. I disallow the claim.

(4)Item 25 Bundle preparation

[22]No such bundle was prepared. I disallow the claim.

(5)Item 27 Second counsel

[23]   I did not certify for second counsel in my judgment nor do I consider that appropriate for litigation in this category. Junior counsel did not address at the hearing and the case that was developed was of very much narrower focus than predicated in her written submissions. Ultimately the argument was one based on established legal principles and raised one essential issue only – had the “Contract Price” as that term appeared in the bond and contract been paid, as a result of which the bond could be considered null and void. That was an argument of sufficiently narrow compass that it does not justify certification for a second counsel.

[24]In respect of the injunction proceedings the following matters are in contention.

(1)Item 2 Commencement of defence

[25]   CRDL says that it was not necessary for RCI to file a statement of defence. Although the interim injunction application was heard before expiration of the time allowed to do so, it was nevertheless at liberty to file a defence at any time after service. It pleaded comprehensively and in a manner useful to refinement of the issues. Predictably in the period since I declined CRDL’s application for interim injunction no further steps have been taken in respect of the prayer for permanent injunction in the statement of claim. It is appropriate that the response to that pleading is therefore recognised in costs award at this stage. I allow the claim.

(2)Items 10, 11 and 15 Conference memoranda

[26]   CRDL says these have already been claimed in the summary judgment proceedings and should therefore be disallowed. The position is covered by RCI’s reduced Band A claim for overlapping items.

(3)Item 23 Filing opposition to interlocutory application

[27]   I see no basis to disallow the item. A notice of opposition was required in terms of the Rules.

(4)Items 24 and 26 Preparation and appearance

[28]   Again, the overlays which CRDL identifies are appropriately recognised in the way RCI proposes.

Result

[29]I allow the following costs in favour of RCI:

(a)As against CCB in CIV-2017-404-2519:

Item	Recovery Rate Category 2	2A	2B	Total
1. Commencement of proceedings	2,230	3	$ 6,690.00
22. Application for summary judgment	2,230	0.6	$ 1,338.00
22. Application for abridgement of time	2,230	0.6	$ 1,338.00
11. Memo in support of abridgement application	2,230	0.4	$    892.00
11. Memo for teleconference	2,230	0.2	$    446.00
13. Appearance at mentions hearing	0.14	$    223.00
24. Preparation of written submissions	2,230	0.755	$ 1,672.50

4      0.2 is the allocation in all bands. I make a 0.1 allowance for both proceedings in respect of the teleconference on 27 October to reflect the “overlap”.

5      The Band A allocation is 0.5 of a day and the Band 3 allocation is 1.5. 2x Band A allocations as sought by RCI in its submission does not fairly reflect what should be an overall allowance of 1.5 days. I have therefore adopted 0.75 of a day for each proceeding.

Item	Recovery Rate Category 2	2A	2B	Total
26. Appearance at hearing	2,230	0.256	$    557.50
Total				$13,157.00

(b)As against CRDL in CIV-2017-404-2558

Item	Recovery Rate Category 2	2A	2B	Total
2. Commencement of defence	2,230	2	$ 4,460.00
23. Notice of opposition to injunction application	2,230	0.6	$ 1,338.00
12. Memo for teleconference	2,230	0.2	$    446.00
13. Appearance at mentions hearing	2,230	0.17	$    223.00
24 Preparation of written submissions	2,230	0.758	$ 1,672.50
26. Appearance at hearing	2,230	0.259	$    557.50
Total				$ 8,697.00

Muir J

Solicitors:

S Robertson, Kensington Swan, Auckland A E Murray, DLA Piper, Auckland

I J Thain, DLA Piper, Auckland K F Gould, Barrister, Auckland

6      Again, I have allocated half of a 0.5 day allowance to each proceeding. The hearing concluded with half a day.

7      Refer footnote 4 above.

8      Refer footnote 5 above.

9      Refer footnote 6 above.