SM & T Homes Limited v Nguyen

[2016] NZHC 845

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-001422 [2016] NZHC 845

BETWEEN

SM & T HOMES LIMITED

Plaintiff

AND

THI KIM CHI NGUYEN AND VINH HGOC NGUYEN

First Defendants

BARFOOT & THOMPSON LIMITED Second Defendant

Hearing:	[On the Papers]
Counsel:	S C Dench for the Plaintiff N C King for the First Defendants T D Rea and C Jiang for the Second Defendant
Judgment:	29 April 2016

JUDGMENT OF EDWARDS J [re Costs]

This judgment was delivered by Justice Edwards on 29 April 2016 at 4.30 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Counsel:     S C Dench, Auckland

N C King, Auckland

Solicitors:    J P Campi, Auckland Sinisa Law, Auckland Glaister Ennor, Auckland

SM & T HOMES LTD v NGUYEN and ANOR [2016] NZHC 845 [29 April 2016]

[1]      The plaintiff successfully obtained an order against the first defendants for specific performance of a sale and purchase agreement.1     Both the plaintiff and second defendant seek increased costs against the first defendants.

Background

[2]      The plaintiff was the successful buyer at auction of a property owned by the first defendants.   Following the first defendants’ failure to settle the purchase, the plaintiff commenced proceedings seeking specific performance of the agreement.

[3]      The plaintiff joined the second defendant (the real estate agent engaged by the first defendants) to the proceeding following an unsuccessful summary judgment application.2    The plaintiff’s primary claim remained its claim against the first defendants for specific performance.  However, two alternative causes of action were pleaded against the second defendant in the event that the primary claim failed.  The second defendant cross-claimed against the first defendants on the basis of estoppel.

[4]      By judgment dated 15 December 2015, I found that there was a sale and purchase agreement formed, and that it was enforceable pursuant to s 24 of the Property Law Act 2007.   I ordered specific performance of the agreement.   In the course of my judgment I favoured the evidence given by the real estate agent over that  given  by the  first  defendants  finding  some  aspects  of  the  first  defendants’ evidence to be implausible and lacking credibility.   My decision on the primary claim meant it was unnecessary to consider the plaintiff’s alternative claim against the  second  defendant,  and  the  second  defendant’s  cross-claim  against  the  first

defendant also fell away.

1      SM & T Homes Ltd v Nguyen [2015] NZHC 3228.

2      SM &T Homes Ltd v Nguyen [2014] NZHC 2269.

[5]      The second defendant seeks a “Sanderson order” whereby an unsuccessful

defendant is ordered to pay the costs of the successful defendant.3

[6]      The Court’s discretion to order one defendant to contribute to the costs of another defendant is a broad one and depends on where the overall justice of the case lies.4   Factors relevant to the Court’s discretion to make such an order include:5

(a)       the reasonableness of the decision to sue both defendants;

(b)the extent to which the unsuccessful defendant contributed to that decision;

(c)       any material developments in the proceeding; and

(d)      the extent to which the plaintiff succeeded.

[7]      The first defendants contend that the joinder of the second defendant was unreasonable and unnecessary.  I do not agree.  The plaintiff was not involved in the dealings between the first defendants and their real estate agent prior to the auction. The plaintiff needed to protect its position should this Court find that there was no enforceable contract of sale.   Calling the real estate agent as a witness would not have provided the requisite level of protection should the primary claim have failed as a result of the real estate agent’s conduct.  It was reasonable to join the second defendant in those circumstances.

[8]      Furthermore, joinder of the second defendant only became necessary as a result of the defence advanced in opposition to the summary judgment application and the allegations made against the real estate agent.  In that respect the actions of the first defendants contributed in a significant way to the decision to join the second

defendant.

3      See Sanderson v Blyth Theatre Co [1903] 2 KB 533.

4      Lane Group Ltd v DI & L Patterson Ltd [2000] 1 NZLR 129 (CA) at [90].

5      At [83]–[84].

[9]      The first defendants also point to the disjunctive nature of the plaintiff’s claims against each defendant, and the fact that the plaintiff’s claim against the second defendant was not actually determined.  Those factors do not alter the overall balance in my view.  As the proceeding unfurled at trial, the central issues in dispute concerned conflicts in the evidence between the first and second defendants.  Those conflicts in the evidence were resolved in favour of the account given by the second defendant’s real estate agent.  In that sense, the second defendant was successful, and an order that the first defendants contribute to the second defendant’s costs is appropriate.

[10]     Finally, the first defendants say that if an order of costs is to be made in favour of the second defendant, then it should be by way of a Bullock order rather than a Sanderson order.  A Bullock order is an order that the plaintiff pay the second defendant’s costs, but allowance for full or partial recovery of those costs is then

made in any costs order in favour of the plaintiff against the first defendants.6     I

consider contribution by the direct route of a Sanderson order accurately reflects the second defendant’s success over the first defendants in the factual contest which absorbed most of the trial.

[11]     In all the circumstances, I am satisfied that an order that the first defendants pay costs to the second defendant is appropriate.

Increased costs

[12]     Both the plaintiff and the second defendant seek an order of increased costs. [13]     The plaintiff has calculated its scale costs on a 2B basis in the sum of $43,078

plus disbursements in the sum of $16,116.   The plaintiff seeks increased costs for discovery, pre-trial preparation and the trial, but it does not set out what uplift is sought for each step, nor does it specify the total increased costs sought.   Actual costs  for  the  proceeding  (excluding  the  summary  judgment  application)  are

estimated at approximately $75,000.

6      See Bullock v London General Omnibus Co [1907] 1 KB 264 (CA).

[14]     The second defendant has calculated its scale costs on a 2B basis to be

$50,175, including an allowance for second counsel.  I consider an allowance for a second counsel to be reasonable given the nature and complexity of the proceeding. The second defendant seeks a 100 per cent uplift on scale taking its total costs to

$100,350.   Actual costs incurred are said to be over $120,000.   The second defendant’s scale calculation includes costs claimed at the current daily rate rather than at the lower rate which applied at the time those steps in the proceeding were taken. Allowing for that adjustment, scale 2B costs for the second defendant amount to $48,015.

[15]     The principles relevant to an award of increased costs are not disputed.  The Court may award an uplift on scale costs in the circumstances set out in r 14.6(3). The grounds advanced in this case are that the first defendants contributed unnecessarily to the expense of the proceeding by pursuing an argument that lacked

merit,7   and  failed  without  reasonable  justification  to  admit  facts,  evidence  or

documents.8

[16]     The touchstone for an award of increased costs is whether the opposing party has failed to act reasonably.9   The approach involves a four-step process by which an uplift from scale is assessed for a particular step in the proceeding.10   An increase of more than 50 per cent is unlikely given that the daily recovery rate is two-thirds the daily rate considered reasonable for a particular proceeding.11

[17]     Both parties submit that the defendants acted unreasonably by pursuing a defence based on untruthful and incorrect allegations which were ultimately rejected by the Court.   The second defendant submits that there were serious allegations levelled against the second defendant’s real estate agent that were proved to be untrue.

[18]     Rejection of the first defendants’ evidence cannot in and of itself justify an

award  of  increased  costs.    Cases  involving  disputed  facts  will  always  involve

7      Rule 14.6(3)(b)(ii).

8      Rule 14.6 (3)(b) (iii).

9      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400 (CA) at [27].

10     Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]–[45].

11 At [46].

findings which disregard one party’s account.  An award of costs to the successful party already reflects that position.  Something more must be required to justify an order of increased costs.

[19]     Although I accept that the presentation of incredible or implausible evidence can be unreasonable conduct, I am not satisfied that advancing such evidence in this case added in any significant way to the costs of steps in the proceeding.  The key issues in the proceeding turned on  what, where and when documents  had been signed.  Factual evidence directed to those issues was always going to be necessary. There  was  undisputed  evidence  that  Mr  Nguyen  had  signed  blank  documents. Mrs Nguyen also gave evidence that she signed a document after the auction but she could  not  remember  what  it  was.   Against  that  background,  those  parts  of  the evidence found implausible or incredible did not add to the costs of the proceeding in any appreciable way.

[20]     Standing back and considering the position overall, I am not persuaded that orders of increased costs are justified in the circumstances.

Result

[21]     The first defendants are ordered to pay:

(a)       Costs in the sum of $43.078 plus disbursements in the sum of $16,116 to the plaintiff; and

(b)      Costs  in  the  sum  of  $48,015  plus  disbursements  as  fixed  by  the

Registrar to the second defendant.

Edwards J