Rongotai Investments Limited v Blaylock
[2023] NZHC 3548
•6 December 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-807
[2023] NZHC 3548
BETWEEN RONGOTAI INVESTMENTS LIMITED
Plaintiff
AND
ROGER MAX BLAYLOCK and
YVONNA MARIA KEREKES as trustees of the Blaylock & Kerekes Family Trust
First DefendantsBUNNINGS LIMITED
Second DefendantNZ CASH FLOW CONTROL LIMITED
Third Defendant
Hearing: On the papers Appearances:
T Mijatov, J K Scragg and S K Brennan for Plaintiff K Sullivan for First Defendants and Third Defendant R B Lange and H P Harwood for Second Defendant
Judgment:
6 December 2023
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[Costs]
[1] In my judgment dated 18 September 2023, I dismissed the applications by the first, second and third defendants for summary judgment and/or strike out of the first, second, third and fourth causes of action in the plaintiff’s statement of claim.1
[2] With regard to costs, I expressed the preliminary view that costs should be reserved at this stage pending substantive determination of the issues. However, if
1 Rongotai Investments Ltd v Blaylock [2023] NZHC 2599.
RONGOTAI INVESTMENTS LIMITED v BLAYLOCK [2023] NZHC 3548 [6 December 2023]
any party disagreed with that approach, then that party could file a memorandum, with any memoranda in response from other parties to be filed within a further 10 working days, and costs would then be determined on the papers.
[3] On 23 November 2023, a memorandum of counsel for the plaintiff as to costs was filed. That memorandum seeks costs against the defendants on a 2B basis with a 50 per cent uplift because the plaintiff made Calderbank offers to the defendants. The defendants have filed memoranda in response opposing the plaintiff’s application for costs. The second defendant seeks an order for costs against the plaintiff in respect of the plaintiff’s application for costs.
[4]The issues are:
(a)is the plaintiff entitled to costs or should costs be reserved?
(b)if the plaintiff is entitled to costs, is it entitled to a 50 per cent uplift?
(c)is the plaintiff required to pay costs to the second defendant?
Legal principles
[5] Costs are ultimately a matter of the Court’s discretion, the overall objective being to achieve an outcome that best meets the interest of justice.2 That discretion is qualified by the applicable costs rules, contained in pt 14 of the High Court Rules 2016. The primary principle applying to the determination of costs is that costs follow the event – meaning that a party who is unsuccessful pays costs to the party who is successful.3
[6] The Court may order a party to pay increased costs where that party has contributed unnecessarily to the time or expense of the proceeding or a step in it.4 Increased costs may be awarded where there is a failure by the paying party to act
2 High Court Rules 2016, r 14.1; Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7] and [16]; Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [21]–[24] and [28]; and Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt Ltd) (2002) 16 PRNZ 662 (CA) at [27].
3 High Court Rules, r 14.2(1)(a).
4 Rule 14.6(3)(b).
reasonably.5 An example is failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.6
[7] Where a settlement offer is made under r 14.10, the party who made the offer may be entitled to costs on steps taken in the proceeding after the offer is made if the amount of the offer exceeds the amount of any judgment obtained by the other party, or would have been more beneficial to the other party than the judgment obtained by the other party, or is close to the value or benefit of any judgment obtained by the other party.7
[8] The Court may also refuse, or reduce, costs otherwise payable to a party if that party, for example, contributed unnecessarily to the time or expense of the proceeding or step in it by failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under r 14.10 or some other offer to settle or dispose of the proceeding.8
Is the plaintiff entitled to costs or should costs be reserved?
[9] The plaintiff acknowledges that r 14.8 of the High Court Rules, which requires costs on an opposed interlocutory application to be fixed when the application is determined, does not apply to an application for summary judgment.9 The plaintiff also notes that while costs on a plaintiff’s unsuccessful application for summary judgment are usually reserved, there is no settled practice with regard to costs on a defendant’s unsuccessful application.10
[10] The plaintiffs submit that there is some support for the proposition that unsuccessful applications for summary judgment by a defendant should be treated differently from unsuccessful applications by a plaintiff. The plaintiffs refer to
5 See Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
6 High Court Rules, r 14.6(3)(b)(v).
7 Rule 14.11(3) and (4).
8 Rule 14.7(f)(v).
9 Rule 14.8(3).
10 Miah v National Mutual Life Association of Australasia Ltd [2016] NZCA 590, [2017] 2 NZLR 241 at footnote 39; and Schmidt v Registrar-General of Land [2015] NZHC 2438 at [15]–[21].
Suharnan v Brookfields11 and Judge v Dempsey.12 In particular, the plaintiffs submit that unsuccessful summary judgment applications by defendants do not necessarily result in the same benefits in relation to overall disposal of the litigation as unsuccessful applications by plaintiffs.
[11] The plaintiffs submit that this is a case where costs should be awarded on the unsuccessful application by the defendants and can be distinguished from other cases where costs have been reserved, for example, Schmidt v Registrar-General of Land, where summary judgment was declined to enable the plaintiff to amend her pleadings to incorporate a newly made allegation of fraud.13
[12] The plaintiffs also rely on the following passage from the decision of the Court of Appeal in NZI Bank v Philpott:14
There will be other cases where the plaintiff has embarked on summary judgment proceedings erroneously in the sense that the rules do not allow the summary judgment procedure, or in the certain knowledge that there is a bona fide question of fact or law which can be determined only after a trial. In those circumstances the Court should be able in its discretion to deprive the plaintiff of costs in those unsuccessful and abortive proceedings and award costs to the defendant.
[13] The plaintiffs submit that this statement applies equally in the context of an unsuccessful application for summary judgment by a defendant. The plaintiffs submit that the defendants were alerted at an early stage, by way of a Calderbank offer made by the plaintiffs on 1 March 2023, that there was a bona fide question of law in this case that could only be answered at trial, but the defendants elected to proceed with their applications anyway.
[14] In the present case, while the defendants were ultimately unsuccessful because I found that the plaintiff’s claims reached the threshold of tenability, I do not consider that the defendants embarked on the summary judgment proceedings “erroneously” or in the “certain knowledge” that there was a bona fide question of law or fact which could only be determined at trial. I agree with the submission of Mr Lange, for the
11 Suharnan v Brookfields [2013] NZHC 586 at [13].
12 Judge v Dempsey [2014] NZHC 2864 at [57].
13 Schmidt v Registrar-General of Land, above n 10, at [23].
14 NZI Bank v Philpott [1990] 2 NZLR 403 (CA) at 405.
second defendant, that the defendants’ applications were based on legitimate arguments as to the correct interpretation of the subject leases.
[15] Further, it seems to me that there was some utility in the defendants’ applications in relation to the overall determination of the substantive proceeding. I agree with Mr Lange’s submission that the detailed submissions by both parties on the correct interpretation of the leases should assist both parties in preparing for trial. Further, the defendants’ applications have resulted in the plaintiff amending its statement of claim to add an alternative argument of implied term.
[16] Therefore, I consider that costs on the defendants’ unsuccessful summary judgment applications should be reserved at this stage pending substantive determination of the issues.
[17] However, I agree with the submission on behalf of the plaintiff that strike out applications are not captured by r 14.8(3).15 In this case, it seems to me that the strike out portion of the applications was approximately 50 percent of the applications. In the circumstances, I am prepared to allow the plaintiff 50 per cent of its 2B costs and disbursements in respect of its successful defence of the defendants’ strike out applications.
Increased costs
[18] The plaintiff seeks increased costs by way of an uplift of 50 per cent on 2B scale costs under rr 14.6(3)(v), 14.10 and 14.11 of the High Court Rules.
[19]The plaintiff has made two Calderbank offers to the defendants.
[20] Will regard to the first offer dated 1 March 2023, this was essentially a “walk away” offer. The plaintiff proposed that the defendants discontinue their applications, and the parties would bear their own costs. In Hira Bhana & Co Ltd v PGG Wrightson Ltd, the Court of appeal stated:16
15 Suharnan v Brookfields [2013] NZHC 586 at [12].
16 Hira Bhana & Co Ltd v PGG Wrightson Ltd [2007] NZCA 342 at [26].
…where the nature of the offer made is simply a “walk away” proposition, made early in the proceedings, it cannot be the case that the mere fact that the party which rejected the offer subsequently loses means that party is required to pay indemnity costs or increased costs. If that were so, it would mean that the costs regime set out in rr 46 – 48G would be effectively bypassed in almost all cases where the defendant succeeds, because defendants would routinely make “walk away” offers of the kind made in this case, and then claim indemnity costs if they subsequently succeed at trial.
[21] In this case, for the reason set out at [14] above, I consider that the defendants had reasonable justification for not accepting the proposed “walk away” and pursuing their applications.
[22] The second Calderbank offer relied on by the plaintiff was made on 16 October 2023. The plaintiff offered to settle its costs claim for $8,714 being its 2B scale costs and disbursements. The offer stated that the plaintiff would seek an order for uplifted costs if the claimed amount was not paid. In response, on 24 October 2023 the second defendant offered, on a without prejudice save as to costs basis, to pay a half share of the 2B costs and disbursements sought in the sum of $4,357 on the basis that it was one of three defendants who had all made similar applications. However, the second defendant’s offer was made on the basis that it reserved its right to seek costs for the summary judgment/strike out application, or at least argue that costs should lie where they fall, if it is ultimately successful at the end of the substantive hearing. Therefore, the plaintiff might have to pay back the $4,357 sum and pay costs to the second defendant.
[23] In the circumstances, I do not consider that the plaintiff is entitled to an uplift on its 2B costs on the basis of its 16 October 2023 offer. The offer sought payment of the plaintiff’s full 2B costs and disbursements, but I have found above that the plaintiff is only entitled to 50 per cent of its 2B costs and disbursements. In the circumstances, the defendants had reasonable justification for not accepting this offer.
Costs against the plaintiff
[24] The second defendant seeks costs against the plaintiff in the sum of $956 because the plaintiff failed to accept the second defendant’s counteroffer made on 24 October 2023. However, as noted above, the counteroffer was made on the basis that the second defendant reserved its rights to claw back the $4,357 and to seek costs
for the applications. I have found that the plaintiff is entitled to costs in the sum of
$4,357 without any such reservation. Therefore, I am not prepared to award costs against the plaintiff as sought by the second defendant or reduce the costs award made to the plaintiff.
Result
[25] The plaintiff is entitled to costs and disbursements to be paid by the defendants in the total sum of $4,357.
Associate Judge Skelton
Solicitors:
Duncan Cotterill, Wellington for Plaintiff
Hughes Robertson, Wellington for First Defendant Simpson Grierson, Wellington for Second Defendant United Legal, Auckland for Third Defendant
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