Self-Realization Mediation and Healing Centre Charitable Trust (New Zealand) v IAG New Zealand Limited
[2018] NZHC 2612
•5 October 2018
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2016-409-000816 [2018] NZHC 2612
BETWEEN SELF-REALIZATION MEDITATION AND
HEALING CENTRE CHARITABLE TRUST (NEW ZEALAND)
Plaintiff
AND
IAG NEW ZEALAND LIMITED Defendant
AND
H CONSTRUCTION NORTH ISLAND LIMITED (FORMERLY HAWKINS CONSTRUCTION LIMITED)
First third Party
AND
ORANGE H MANAGEMENT LIMITED (FORMERLY HAWKINS MANAGEMENT LIMITED)
Second third Party
AND
BRENCHLEY DEVELOPMENTS LIMITED
Third third party
AND
BUILDING ONWARD LIMITED Fourth third party
AND
HI TECH BUILDING SYSTEMS LIMITED Fifth third party
AND
ORANGE H GROUP LIMITED (FORMERLY HAWKINS GROUP LIMITED
Sixth third party
Determined on the papers Representation:
R C Evans for Fourth third party
P K Tucker for Fifth third partyO Collette-Moxon for Defendant
SELF-REALIZATION MEDITATION AND HEALING CENTRE CHARITABLE TRUST (NEW ZEALAND) v
IAG NEW ZEALAND LIMITED [2018] NZHC 2612 [5 October 2018]
Judgment: 5 October 2018
JUDGMENT OF ASSOCIATE JUDGE OSBORNE (Costs)
Introduction
[1] On the application of the fourth and fifth third parties (“Onward” and “Hi
Tech”), the Court gave judgment setting aside the third party notices in question.1
[2] The Court determined that costs must follow the event. It anticipated that counsel would agree that costs should be on a 2B basis,2 without a certificate for second counsel.3 Directions were made for the filing of memoranda as to costs in the event of any disagreement between the parties. There has been a measure of disagreement with the result that memoranda have been filed.
Measure of agreement
[3] Counsel responsibly conferred as to costs after the publication of the judgment.
[4] Ms Evans for Onward and Ms Tucker for Hi Tech calculated costs on a 2B basis (together with disbursements) at $23,826.73. Counsel for the defendant (“IAG”) promptly confirmed agreement as to the calculation of the amount.
[5] In the submissions subsequently received, there is no suggestion that the 2B calculation was incorrect. I have reviewed the items taken into account. Assuming there is to be a 2B calculation, they are correctly claimed and calculated.
1 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG New
Zealand Limited [2018] NZHC 2077
2 High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).
3 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG New
Zealand Limited, above n 1, at [70].
The difference between the parties
[6] The major difference between the parties is as to when the costs should be paid
(if at all).
[7] Since the setting aside judgment was issued, IAG has made application for review. That application has been allocated a firm hearing date.
[8] The third parties want their costs and disbursements to be payable now.
[9] When Ms Harris (for Onward) wrote to IAG’s solicitors in relation to the
$23,826.73 calculation, she stated:
We invite your client to agree to pay $23,826.73 by 5.00 pm Friday 17 August, failing which we have instructions to proceed to an application to the Court and seek costs with a 50% uplift.
[10] Ms Tucker for Hi Tech sent a letter to similar effect.
[11] IAG’s solicitors, when replying with confirmation that the $23,826.73 calculation was accepted, proposed that costs (instead of being paid immediately) be not paid until the application for review is determined.
[12] Soon afterwards, the solicitors for both Onward and Hi Tech notified IAG’s solicitors that they regarded the costs (as calculated and discussed) as now payable. They referred to r 14.8(1)(b) High Court Rules.
[13] Rule 14.8(1) states:
Costs on interlocutory applications
(1)Costs on an opposed interlocutory application, unless there are special reasons to the contrary, –
(a)must be fixed in accordance with these rules when the application is determined; and
(b) become payable when they are fixed.
[14] For IAG, Mr Collette-Moxon responded that the parties had agreed the amount of costs, not that the costs were actually payable. He observed that this was a question of the nature of agreement between parties and not a matter of the Rules.
Discussion
[15] The costs and disbursements of the interlocutory application have not become payable in terms of r 14.8(1)(b). That is because they have not been fixed in accordance with r 14.8(1)(a). As Mr Collette-Moxon observed in his correspondence, the figure of $23,826.73 had been arrived at through (conditional) agreement of the parties not through fixing by the Court.
[16] There was therefore no basis on which the third parties could claim, as they did, that the $23,826.73 was now payable. A reading of the plain words of the parties’ correspondence makes clear the conditionality which attached to the positions of the respective parties.
The third parties’ positions diverge
[17] On filing their respective submissions on costs, the positions of Onward and
Hi Tech have diverged.
[18] Hi Tech relies on the agreement as to quantum earlier reached and asks for orders fixing that quantum and making it payable under r 14.8(1)(b). Onward also seeks an additional sum of $1000 on account of the costs of filing costs submissions.
[19] Onward no longer pursues an argument as to the $23,826.73 being payable under r 14.8(1)(b). Instead it now pursues an order awarding it increased costs under r 14.6(3) High Court Rules (calculated by reference to a 50 percent uplift on a 2B calculation).
[20] Ms Evans (for Onward) submits that increased costs are justified on the basis that:
(a)IAG pursued an unnecessary step in adding Onward as a third party and pursued an argument which lacked merit despite repeated communications identifying the lack of merit;
(b)IAG refused without reasonable justification to accept Onward’s offers that there be a discontinuance with costs to lie where they fall;
(c)IAG is now vexatiously refusing to make payment despite costs having been agreed.
[21] For IAG, Mr Collette-Moxon submits that the practicable and just solution is that costs be reserved until the outcome of the review application. To the extent that Onward now seeks increased costs, Mr Collette-Moxon submits that increased costs should be refused for two reasons. First, because the fourth third party has agreed the quantum of $23,826.73, and secondly because there is no basis for increased costs in terms of r 14.6(3).
Discussion – r 14.8
[22] There is one thing which the Court (unless there are special reasons to the contrary) must do in terms of r 14.8(1) with one stated consequence. What the Court must do is fix the costs when the interlocutory application is determined. The consequence of such fixing (unless the Court for special reasons determines otherwise) is that the fixed costs will become payable at that point.
[23] There is no demonstrated, let alone a special, reason in this case not to fix the costs while the interlocutory proceeding is fresh. In this regard I adopt the observation authors of McGechan on Procedure that, even when costs (meaning the incidence of costs) are reserved, it may be wise to fix their quantum.4
[24] That leaves for decision whether the costs to be fixed should become payable now, at the point they are fixed.
4 AC Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at
[HR14.8.04].
[25] I do not regard it as appropriate in relation to this interlocutory proceeding to have costs become payable at the point they are fixed. The defendant has promptly exercised its right to apply for review of the interlocutory judgment. The parties have obtained a hearing date.
[26] The Court of Appeal explained the purpose of the review procedure in Graebar
Holdings Limited v Taylor.5 The Court observed of the-then numbered rule;
Rule 264 is intended to provide an alternative to an appeal to this Court so that interlocutory matters may be dealt with expeditiously and less expensively in the High Court.
[27] The outcome of the third parties’ interlocutory applications will now be determined through the review procedure. As Mr Collette-Moxon submits, if IAG’s review application succeeds the affected third party would not be entitled to costs. (At that point, if the defendant’s review applications have been successful, the Court is likely to make an order under r 14.8(2) High Court Rules).
[28] The existence of the application for review, with its allocated hearing date, is a special reason which cuts across the default expectation under the High Court Rules that costs of interlocutory applications (if fixed upon the determination of the application) will become payable at that point.
[29] A direction will accordingly be made, in fixing the interlocutory costs, that they will not become payable until further order of the Court.
Discussion – increased costs
[30] Onward alone makes an application for increased costs.
[31] I put to one side Mr Collette-Moxon’s submission that Onward is not entitled to apply for increased costs by reason of an agreement reached as to scale costs. The parties did not reach such an agreement unconditionally. That leaves Onward’s application to be determined by reference to the considerations identified in r 14.6(3). Ms Evans relies on two particular considerations.
5 Graebar Holdings Limited v Taylor [1989] 2 NZLR 10 (CA) at 16.
[32] In terms of r 14.6(3)(b)(ii) Ms Evans submits that IAG pursued an unnecessary step or an argument which lacked merit.
[33] Such a conclusion is not available to Onward when the interlocutory judgment is carefully read. The judgment does not find that IAG lacked arguable claims against the third parties. The judgment turns substantially on the extent to which the third parties would be drawn into a proceeding in which the preponderance of the trial is taken up with issues involving other parties.6 As the interlocutory judgment observes, the setting aside of the third party notices leaves IAG with its ability to bring separate proceedings against each of the third parties.7
[34] The matters informing the outcome of the interlocutory application were matters of balancing and judgement and do not reflect unnecessary or unmeritorious decision-making on the part of IAG or its advisors.
[35] Onward also asserts that increased costs are justified under r 14.6(3)(b)(v) on the basis that IAG refused without reasonable justification to accept an offer of settlement (discontinuance with costs lying where they fall).
[36] Onward has produced in evidence the correspondence by which it made its proposal as to discontinuance without costs. The correspondence focuses on the modest level of involvement of Onward in the repair projects which are the subject of this proceeding, with Onward likely to be “dragged along for the full extent of these proceedings when its involvement in repairs was minimal”. In short, the solicitors for Onward anticipated the basis upon which the setting aside application was successfully made.
[37] For similar reasons to those applying under r 14.6(3)(b)(ii), I am not satisfied that it would be just to award increased costs by reference to IAG’s refusal to accept the discontinuance proposal. The Court has not given judgment on IAG’s claims against Onward. Rather it has left IAG to pursue those claims in a separate proceeding
6 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG New
Zealand Limited, above n 1, at [66].
7 At [67].
if at all. The observation of the Court of Appeal in Holdfast NZ Limited v Selleys Pty
Limited has some resonance in this situation:8
A Court cannot assume that a discontinuance is akin to judgment for the defendant.
[38] I am accordingly not satisfied that there should be an order for increased costs in favour of Onward. A calculation of costs on a 2B basis is appropriate.
The costs of costs submissions
[39] Counsel for Hi Tech alone seeks an item for costs relating to the costs submissions themselves. In the case of Hi Tech, counsel’s submissions were contained in one and a half pages, with relevant documents attached.
[40] I do not consider it appropriate to add an item for those cost submissions. Hi Tech has failed to obtain the most significant outcome it was seeking, namely an order that fixed costs be paid now.
Orders
[41] I order:
(a)The defendant is to pay to each of the fourth and fifth third parties their costs of the interlocutory applications to set aside third party notices, together with disbursements, which I fix in each case at $23,826.73 (“the costs”);
(b)The costs will not become payable until further order of the Court, with leave reserved to each of the parties to apply by memorandum for further direction in the event no order is made in relation to these costs
8 Holdfast NZ Limited v Selleys PTY Limited (2005) 17 PRNZ 897 (CA), at [29].
upon the determination of the defendant’s review application.
Associate Judge Osborne
Solicitors:
Shine Lawyers, Christchurch
Duncan Cotterill, AucklandHazleton Law, Wellington Joynt Andrews, Christchurch Rhodes & Co, Christchurch
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