SPAK (1996) Limited v Leroy
[2023] NZHC 803
•18 April 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-001483
[2023] NZHC 803
BETWEEN SPAK (1996) LIMITED
Plaintiff
AND
REECE LEROY
Defendant
AND
BODY CORPORATE 407404
Third Party
Hearing: (On the papers) Judgment:
18 April 2023
COSTS JUDGMENT OF VENNING J
This judgment was delivered by me on 18 April 2023 at 2.15 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Russell McVeagh, Auckland
K3 Legal Limited, Auckland
SPAK (1996) LIMITED v LEROY [2023] NZHC 803 [18 April 2023]
[1] In a decision delivered on 2 December 2021 this Court dealt with a number of costs orders between the parties to this proceeding.1 Relevantly for present purposes the Court ordered indemnity solicitor/client costs in favour of the defendant (Mr LeRoy) against the plaintiff SPAK (1996) Limited (SPAK) for all attendances in relation to the summary judgment and strike out applications. This Court dealt with the matter as the Judge who had heard the summary judgment and strike out applications had retired.2
[2] SPAK appealed the decision of the Associate Judge entering judgment on the defendant Mr LeRoy’s application for summary judgment. SPAK also appealed the award of indemnity costs.
[3] In its decision delivered on 18 November 2022 the Court of Appeal dismissed SPAK’s appeal against the defendant’s summary judgment but allowed SPAK’s appeal in relation to indemnity costs:3
[192] As discussed, by the time of the hearing into the summary judgment/strike out applications, there was no purpose in continuing with the proceedings. They should have been discontinued. Given our observations in respect of the improper purpose finding, we do not consider that indemnity costs were appropriate, although our other findings suggest increased costs might well be. In the circumstances, we allow the appeal in respect of indemnity costs and remit the matter back to the High Court for costs on the summary judgment and strike out to be considered afresh. Mr LeRoy is to file his submissions within 21 days of the date of this judgment, with any reply required 14 days thereafter.
[4] In accordance with the directions, the parties exchanged memoranda in relation to the issue of costs. Unfortunately those memoranda were not referred to me by the Registry until after the Easter vacation. The Court apologises to the parties for the delay in addressing the issue.
[5] Despite the decision of the Court of Appeal counsel for Mr LeRoy submitted that the interests of justice required the Court to exercise its discretion to reinstate the indemnity costs award in the defendant’s favour. While Mr LeRoy had been awarded indemnity costs he had not received his actual costs but in fact had received
1 SPAK (1996)Limited v LeRoy [2021] NZHC 3278.
2 High Court Rules 2016, r 14.9.
3 SPAK (1996) Limited v LeRoy [2022] NZCA 564.
significantly less than those because the indemnity costs awarded were tied to his costs incurred up until the decision of 2 December 2021. His subsequent costs were not covered.
[6] Counsel submitted that Mr LeRoy should not be required to meet further costs when he is already significantly out of pocket. SPAK had advanced frivolous and hopeless claims that amounted to an abuse of process. It had inappropriately wasted Court resources and put Mr LeRoy to significant expense.
[7] Despite the Court of Appeal’s finding the Associate Judge may have gone too far in some of his observations, counsel argued indemnity costs were still justified, taking into account:
(a)the proceedings were obviously frivolous from an early stage; and
(b)the plaintiff’s actions during the conduct of the proceedings.
[8] In the alternative, counsel for Mr LeRoy submitted that increased costs are appropriate and sought an uplift of at least 80 per cent from scale 2B costs. Counsel makes the practical point that there is a risk Mr LeRoy will not be able to repay any balance in costs to SPAK which would effectively achieve the purpose which SPAK set out to achieve, namely to disadvantage Mr LeRoy.
[9] In response counsel for SPAK submits that the Court of Appeal had unequivocally confirmed that they did not consider indemnity costs were appropriate. In the circumstances scale costs on a 2B basis were appropriate. In the alternative, if the Court was minded to make an award of increased costs any increase should be modest (in the region of 20 per cent). SPAK submits there is no basis for reinstating an indemnity costs award. Given the findings of the Court of Appeal the threshold for awarding indemnity costs under High Court Rules 2016, r 14.6(4)(a) was not reached. A mere finding of abuse of process on a strike out application does not, without more, automatically attract costs.4
4 Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [21].
[10] Counsel for SPAK next submitted the fact the appeal on the substantive summary judgment was dismissed does not support the submission for indemnity costs. Costs on that appeal are a matter for the Court of Appeal. Further, any practical consequences to Mr LeRoy simply follow from the decisions of the Court.
[11] SPAK also submits that there is no basis for an award of increased costs. There are no particular specific actions by SPAK which contributed to the additional expense or delay of any particular step in the proceeding. Even if there was any unreasonableness in SPAK’s actions the Court should still consider the extent to which that unreasonableness contributed to the time or expense of the proceeding. In any event, as noted, any increase should be modest.
[12] SPAK also submits that a number of steps claimed by Mr LeRoy are not properly claimable:
(a)the memorandum of 5 May 2021 and the appearance at callover on 6 May 2021 – these related to SPAK’s contempt application for unless orders, the cost orders in respect of which have not been challenged;
(b)a memorandum of 15 June 2021 and the memoranda of 14 July and 23 July 2021 which in part related to Mr LeRoy’s default;
(c)preparation of written submissions for summary judgment and strike out – SPAK submits Mr LeRoy should not receive costs for two sets of submissions; and
(d)the claim for preparation of supplementary bundle and authorities.
[13] Mr LeRoy’s counsel filed a memorandum in reply to the plaintiff’s memorandum. It is submitted that an order reducing the quantum of costs from indemnity to an uplift or even to a standard band does not of itself constitute a success which would support an adjustment in SPAK’s favour. Mr LeRoy repeats the submission that the plaintiff’s conduct and specifically its inadequate alerting of the Court to material matters in pursuit of a meritless appeal contributed to costs.
Analysis
[14] This Court had awarded indemnity costs based on the Associate Judge’s finding of improper purpose. However, the Court of Appeal did not consider the Judge should have made that finding of improper purpose without a hearing. The Court of Appeal’s full findings as to improper purpose are important:5
[182] The Judge was clearly, with some justification, concerned that SPAK was pursuing its claim against Mr LeRoy. SPAK’s then counsel had contended that SPAK’s principal objective in bringing the claim was to have its property rights upheld. The Judge challenged counsel on that proposition, saying that on the material before him it appeared as if SPAK had used the proceedings to go out of its way to blacken Mr LeRoy’s character. The Judge put SPAK on notice of his concerns, which were supported in large part by SPAK’s own evidence and behaviour, for example: reporting the Door Knocking Incident to the police; writing the Letters to the residents; accusing Mr LeRoy of “attempted manslaughter” in respect of his driving in the carpark; reporting that incident to the police, who viewed the CCTV footage and concluded it was insufficient to warrant any further investigation as the police believed no offence had been committed; writing to the residents at the time of the AGM seeking the removal of the Body Corporate’s Chairperson and termination of Mr LeRoy’s employment/contract as building manager.
[183] The Judge’s finding of improper purpose was therefore based on the evidence before him, much of it emanating from SPAK itself. However, while the Judge’s scepticism as to SPAK’s purpose was understandable, we consider he went too far in some of his observations.
[184] Mr Salmon made extensive reference to the COVID-19 pandemic and the Hotel’s function as a MIF. He argued that Mr LeRoy was placing the running of the facility at risk and the proceedings were necessary to ensure it could continue to play its part in keeping New Zealand COVID-free.
[185] The Judge did not ignore this context. He did not accept that Mr LeRoy’s actions compromised the facility’s operation, finding it hard to accept that Mr LeRoy’s actions could be construed as putting anyone at risk from COVID-19. Mr LeRoy returned the Letters, which had originated from the Hotel, without contact with anyone inside the Hotel. The point of MIF was to prevent COVID-19 escaping from the facility rather than entering it. Assuming they originated from inside the Hotel, any risk arose from the Letters themselves.
[186] The COVID-19 environment provides an overlay to events at the time. We can accept that SPAK was legitimately concerned about the financial viability of the Hotel and the need to make its use as a MIF a success. In the circumstances, we consider that SPAK should have had the opportunity to have its credibility on purpose tested at a hearing before any finding of improper purpose. As a result, the Judge’s findings as to improper purpose could not be justified.
5 SPAK (1996) Limited v LeRoy, above n 3, at [182]–[187].
[187] But the trespass claims were trivial and petty. We consider the proceedings frivolous and, to that extent, an abuse of process. Even if they had been commenced for a proper purpose, by the time of the application for summary judgment and strike out, there was no proper purpose in continuing with them. We agree with the Judge that, had summary judgment not been granted, the claim should nevertheless have been struck out.
[15] Essentially the Court considered the Judge went too far in some of his observations. Ultimately the Court concluded that SPAK should have had the opportunity to have its credibility on purpose tested at a hearing before a finding of improper purpose was made and as such the Judge’s findings to that effect could not be justified. For that reason indemnity costs were not appropriate.
[16] None of the matters raised by Mr LeRoy’s counsel in submission address that fundamental finding of the Court of Appeal. In light of that Court’s view and findings indemnity costs were not appropriate.
[17] However, as noted, the Court of Appeal confirmed that SPAK’s proceedings were frivolous and to that extent an abuse of process. Further, the Court of Appeal went on to confirm that increased costs might well be appropriate. I agree.
[18] SPAK took the point that strictly speaking none of its actions could be said to have contributed unnecessarily to additional time or expense being required for the proceeding, having regard to the matters referred to at r 14.6(3)(b)(i)–(v).
[19] I consider that to be an unduly restrictive approach to the application of those provisions of the rule, particularly where the Court of Appeal has confirmed the proceedings to have been frivolous and an abuse of process. In any event, even if none of r 14.6(3)(b) applied, r 14.6(3)(d) applies. The reason that justifies the Court making an order for increased costs is that the proceedings were frivolous and an abuse of process. Frivolous proceedings occupy time of the Court which, by definition, should not have been wasted in that way. An uplift of 50 per cent is appropriate.
[20] In Minister of Education v James Hardie New Zealand,6 Fitzgerald J considered that without more, a successful strike out based on a finding of an abuse of
6 Minister of Education v James Hardie New Zealand, above n 4.
process, does not of itself support an award of indemnity costs. But in the present case, the findings of the Associate Judge that were confirmed by the Supreme Court go beyond a bare finding of abuse. Further, the Judge’s observations were in relation to an award of indemnity costs rather than an award of increased costs.
[21] Having reviewed the judgment of the Associate Judge with the further clarification and explanation provided by the Court of Appeal’s decision on appeal this Court is satisfied that increased costs of 50 per cent are justified in the circumstances of this case.
Steps claimed
[22] I agree with SPAK’s submission that the memorandum of 5 May 2021 and the appearance at callover on 6 May 2021 are not claimable.
[23] However, SPAK’s other objections to the steps claimed by Mr LeRoy are not accepted. While they may have been steps occasioned by others rather than SPAK the short point is that SPAK took and was responsible for these proceedings and made claims which the Court of Appeal has confirmed were trivial and petty. There was no proper purpose in pursuing them. The steps would not have been incurred if SPAK had not pursued its trivial and petty claims.
Result
[24]Mr LeRoy is to have costs to 2B scale uplifted by 50 per cent which amount to
$39,435.00 together with disbursements of $1,487.60, in total $40,922.60.
Venning J
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