South Island Investments Limited v Centuria Property Holdco Limited

[2022] NZHC 1672

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1746

[2022] NZHC 1672

BETWEEN

SOUTH ISLAND INVESTMENTS LIMITED

Plaintiff

AND

CENTURIA PROPERTY HOLDCO LIMITED

Defendant

Hearing:	On the papers
Appearances:	CT Gudsell QC and MRC Woolf for the Plaintiff MC Sumpter and WM Cheyne for the Defendant
Judgment:	14 July 2022

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

[Costs]

This judgment was delivered by me on 14 July 2022 at 3.30pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel:

Morrison Kent, Wellington Chapman Tripp, Auckland

CT Gudsell QC, Hamilton

SOUTH ISLAND INVESTMENTS LTD v CENTURIA PROPERTY HOLDCO LTD [2022] NZHC 1672 [14

July 2022]

Introduction

[1]                  On 17 March 2022 I delivered a reserved judgment in this matter granting leave to the plaintiff to apply out of time for summary judgment.1 The summary judgment application is allocated for a half day fixture on 27 July 2022.

[2]                  In the judgment granting leave I directed that the parties were to confer on costs and try to reach agreement. If that was not possible, the parties were to file memoranda.

[3]Costs memoranda have now been filed.

Costs Claimed

[4]                  The plaintiff seeks 2B costs for both the hearings on 8 July 2021 and 23 November 2021 and steps leading up to them. The plaintiff attaches a schedule to its costs memorandum calculating costs as totalling $17,686 plus disbursements of $500.

[5]                  The plaintiff submits that, as a starting point, having succeeded on the leave application, the plaintiff is entitled to costs.2 The plaintiff says further the “primary ground” upon which leave was sought was always the contractual interpretation issue as addressed at paragraphs 17, 20, 34 and 37 of the plaintiff’s submissions dated 24 June 2021.

[6]The plaintiff relies on paragraph [76] of the judgment where I held:

I record my preliminary view (as will be clear from the judgment above) that the need for the adjournment of the original hearing arose as a result of the defendant advising it no longer intended to rely on paragraph 22.3 of its statement of defence. On that preliminary basis, SIIL ought to be entitled to costs in respect of the original hearing in July 2021. This issue may however be addressed in memoranda if necessary.

[7]                  The plaintiff seeks costs with respect to both stages submitting that this is appropriate because:

1      South Island Investments Ltd v Centuria Property Holdco Ltd [2021] NZHC 504.

2      Citing the general principle in High Court Rules 2016, r 14.2(1)(a).

(a)the plaintiff supports my “preliminary view” as set out above;

(b)the defendant’s abandonment of part of its pleading at the July 2021 hearing resulted in the adjournment, and led directly to the plaintiff incurring unnecessary costs;

(c)had the defendant not abandoned part of its pleading, the leave application would have been determined following the July hearing and two half day hearings would not have been required;

(d)as a result of the defendant amending its pleading, the plaintiff was required to amend the leave application, file supplementary evidence and supplementary submissions, and was put to the cost of having counsel appear at two hearings.

[8]                  In the plaintiff’s submission, the defendant’s abandonment of part of its pleading arguably gives rise to grounds for increased or indemnity costs. In order however for costs issues to be dealt with efficiently and expeditiously, the plaintiff simply seeks 2B costs for both stages of the application.

[9]In addition, the plaintiff seeks costs for:

(a)filing an amended statement of claim, which was a direct consequence of the defendant abandoning part of its pleading and filing an amended statement of defence; and

(b)two memoranda relating to the leave application.

Defendant’s submissions

[10]              The defendant accepts that the plaintiff succeeded in obtaining leave and accepts that costs should follow the event. The defendant however submits that costs should be reduced pursuant to r 14.7(d) and (f) of the High Court Rules 2016. The defendant says that the plaintiff’s leave application was needlessly broad, forcing the defendant to file extensive and costly evidence on the merits of whether it was using reasonable endeavours. In the circumstances, the defendant says a fair result would

be to award the plaintiff $6,214 in costs on the first hearing and let costs lie where they fall on the second hearing.

[11]              The reason the defendant says the plaintiff’s costs entitlement should be reduced pursuant to r 14.7(d) and (f), is that the plaintiff’s amended statement of claim alleged breaches of obligations to use reasonable endeavours to procure completion of the works and to progress the project. Against that context, the defendant’s opposition centred on the allegation that the defendant was in breach of reasonable endeavours obligations in clauses 23 and 27 of the parties’ agreement. It therefore filed extensive evidence detailing the steps it had taken since the contract was signed to comply with those reasonable endeavours obligations.

[12]              In addition, the defendant opposed leave on the basis that questions of “reasonable endeavours” were not suitable for summary resolution, particularly where the discretionary relief sought was specific performance. The defendant submits that my judgment endorses this position.3

[13]              In that context the defendant submits that while the plaintiff was ultimately the successful party, its entitlement to costs should be reduced under r 14.7(d) and (f).

[14]              The defendant says that not only was the plaintiff’s request for leave to seek specific performance by way of summary judgment lacking in merit, but the defendant also twice asked the plaintiff, unsuccessfully, to confine its application to the declarations sought.

[15]              Furthermore, the defendant records that the plaintiff cannot recover the following costs:

(a)the cost of pleading in response to the defendant’s amended statement of defence;

(b)the cost of filing memoranda; and

(c)sealing costs.

3      South Island Investments Ltd v Centuria Property Holdco Ltd, above n 1, at [54].

What is the appropriate costs order?

Relevant costs principles

[16]              The starting point is that costs are at the discretion of the Court.4 Although the discretion is a wide one, it is not unfettered. Rule 14.2 of the High Court Rules sets out the general principles and includes:

(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.

…

(f)an award of costs should not exceed the costs incurred by the party claiming costs.

(g)so far as possible the determination of costs should be predictable and expeditious.

[17]              Rules 14.3 to 14.5 provide for the categorisation of proceedings, appropriate daily recovery rates and the determination of a reasonable time for each step. These proceedings have not yet been categorised but category 2 appears appropriate and the parties do not suggest otherwise.

[18]Rules 14.7(d) and (f), as relied on by the defendant, provide as follows:

14.7     Refusal of, or reduction in, costs

Despite rules 14.2 to 14.5, the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if –

…

(d) although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; or

…

(f)the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(i)failing to comply with these rules or a direction of the court; or

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)failing, without reasonable justification, to admit facts, evidence, or documents, or accept a legal argument; or

4      High Court Rules 2016, r 14.1.

(iv)failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v)failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding.

Discussion

[19]              Applying the above principles, I do not accept the defendant’s submission that its costs were significantly increased as a result of the plaintiff’s application for leave extending to remedies based on reasonable endeavours obligations for which I did not grant leave.

[20]              The defendant’s position at both hearings was that the reasonable endeavours obligations continued to apply to the matters set out in clause 27.1(a) to (e) even after works had commenced. In my leave decision I held that it was reasonably arguable that the reasonable endeavours obligations did not continue to apply to those matters, there being a question of contractual interpretation as to whether this was in fact the case. In my view, because of its position as to the ongoing application of the reasonable endeavours obligations, the defendant would have led reasonable endeavours evidence whether the plaintiff had confined its application to the remedy for which leave was granted or not. I do not therefore consider this is a proper basis for reducing the costs award.

[21]              Nor am I dissuaded from my preliminary view that the reason two hearings were required was because counsel for the defendant advised at the first hearing that the defendant no longer wished to rely on paragraph 22.3 of its pleading. This significantly affected the plaintiff’s application for leave and the summary judgment application. The leave application was therefore adjourned part heard on the basis that the defendant was to file an amended statement of defence confirming its position and provide either a copy of the Head Contract agreed (or, if not possible, such information as required to be exchanged under the information exchange protocol between the parties). The need for the two hearings only arose therefore as a result of the defendant’s actions. It is appropriate therefore that the defendant be ordered to pay costs in respect of both hearings.

[22]              I accept that leave was granted following the second hearing only in respect of one of the remedies sought by the plaintiff; the remaining six remedies depending on “reasonable endeavours” or steps being taken “as soon as reasonably practicable”. I held these matters were not amenable to summary judgment especially where there were clearly disputed facts. However, as I have explained above, the defendant’s costs are unlikely to have increased significantly as a result of the plaintiff not confining its application, as the defendant would have filed evidence detailing the steps taken to comply with the reasonable endeavours obligations in any event.

[23]              I consider though that it is appropriate to make a small reduction to reflect the fact that the plaintiff did not succeed in relation to six of the remedies sought. Although responding to these matters would have increased costs for the defendant, I do not consider it would have done so very significantly. On that basis, I reduce the amount claimed only for the second hearing and only by 25 per cent.

Costs of pleading in response to the amended statement of defence

[24]              The defendant further submits that the plaintiff is not able to recover for the cost of filing its second amended statement of claim because the High Court has repeatedly held under r 7.77 that the costs consequences of amended pleadings are best addressed at the conclusion of the proceeding, unless there has been a significant number of amended pleadings.5

[25]              Furthermore, the defendant submits that the plaintiff’s second amended statement of claim is not a pleading in response to an amended pleading. The defendant submits that it filed its amended statement of defence on 15 July 2021 and that there was no requirement under the Rules or otherwise for the plaintiff to file a second amended statement of claim. The fact that the plaintiff chose to re-draft its pleading does not entitle it to costs on that step.

5      See Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at [HR7.77.09] citing Jones v Nortera Rural Resources Ltd [2014] NZHC 2855 at [32]; Wishart v Murray [2016] NZHC 3133 at [17]; and Day v Official Assignee [2017] NZHC 847 at [38].

[26]              The change made by the defendant to its statement of defence was significant and although not required by the Rules, may have necessitated an amended pleading from the plaintiff. I consider however that it is appropriate for the costs of the amended statement of claim to be reserved as is the usual position under r 7.77. I do not therefore include the costs of the second amended statement of claim in the costs awarded at this stage.

Memoranda

[27]              The plaintiff seeks the costs of two memoranda, neither of which the defendant considers to be recoverable.

[28]              The defendant submits the 14 April 2021 joint memorandum setting out agreed timetable orders is entirely unremarkable, reflects a joint position, and is unlikely to have taken 0.4 days to prepare. Similarly, the defendant says, the 12 August 2021 memorandum is half a page and contains little substance.

[29]              The 14 April 2021 memorandum was filed in advance of the first call seeking directions by consent for the hearing of the leave application. It was a necessary step in relation to the application and so, in my view, costs are appropriately sought. As far as the time required, 0.4 appears to be appropriate. The memorandum records that counsel for the plaintiff has contacted the Court and that the parties have also conferred on their dates of availability. Both of these aspects would have added to the time taken.

[30]              The 12 August 2021 memorandum was filed in accordance with the direction made in my minute of 8 July 2021. It was followed by a memorandum filed on behalf of the defendant dated 26 August 2021 and then a minute dated 6 September 2021. Neither of those steps have a costs allowance. Costs are intended to be predictable and expeditious. I consider therefore it is appropriate for the standard 0.4 of a day to be awarded. I note that this time period will be reduced by 25 per cent together with the other steps for the second hearing.

Sealing costs

[31]              The defendant further objects to an award for the costs of sealing the judgment on the basis that the plaintiff has not sealed the judgment and parties are only entitled to the costs of steps actually taken in the proceeding but not for costs that have not been incurred, relying on r 14.2(1)(f) as set out above.

[32]              The plaintiff has been unable to seal the judgment as a result of the defendant’s application for recall. In my view it is appropriate, however, to order that when the judgment is sealed, the plaintiff is entitled to costs for that step. I leave it to the plaintiff to seek these costs from the defendant once they are incurred.

Increased or indemnity costs

[33]              For completeness, the defendant makes further submissions rejecting any suggestion that its conduct could justify an award of increased or indemnity costs. As the plaintiff does not seek increased or indemnity costs, it is not necessary to determine this question.

Quantum

[34]The plaintiff claims costs associated with the first hearing of 3.0 days (0.4 +

0.6 + 1.5 + 0.5) including the 14 April 2021 memorandum and 3.6 days associated with the second hearing (0.4 + 0.6 + 1.5 + 0.6 + 0.5). Applying the 25 per cent reduction to the costs associated with the second hearing reduces this to 2.7 days. Adding this to 3.0 days for the first hearing results in a total of 5.7 days. At a daily rate of $2,390, costs amount to $13,623.

[35]              I do not include the 0.2 of a day claimed for sealing the judgment in the total, leaving this to the plaintiff to claim once sealed. The additional amount for sealing will be $478 (0.2 times $2,390).

[36]              Disbursements of $500 are awarded as claimed and there will also be a filing fee of $50 for sealing once that occurs.

Result

[37]The defendant is to pay costs to the plaintiff for the leave application of

$13,623 plus disbursements of $500.

[38]              A further amount of $478 plus disbursements of $50 may be claimed after the judgment is sealed.

Associate Judge Sussock