Stewart v Milano International 2007 Limited

[2018] NZHC 2925

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1182

[2018] NZHC 2925

BETWEEN

KRISTINE MARY STEWART

First Plaintiff

JOSEPH MATTHEW BROWN
Second Plaintiff

AND

MILANO INTERNATIONAL 2007 LIMITED

First Defendant

EURO ASIA BUILDING
CONSTRUCTION LIMITED

Second Defendant

Hearing:

On the papers

Counsel:

CRT Hollings for plaintiffs MR Taylor for first defendant

No appearance for second defendant

Judgment:

12 November 2018

JUDGMENT OF FITZGERALD J

[As to costs]

This judgment was delivered by me on 12 November 2018 at 2:30 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:Andrew Seton Law Ltd, Auckland (S West) Maria Taylor, Auckland

Stewart v Milano International 2007 Limited [2018] NZHC 2925 [12 November 2018]

Introduction

[1]                   The first and second plaintiffs are the owners of property in Titirangi. They sue the defendants for trespass and nuisance, claiming the defendants have been unlawfully crossing the plaintiffs’ land to complete construction projects on adjoining properties. Whata J granted interim injunctions to the plaintiffs on 24 August 2018.1 The first defendant consented to the injunctions being granted and the second defendant made no appearance. This judgment determines costs on the application for interim injunctions.

[2]                   The plaintiffs seek indemnity costs or, failing that, an uplift on 2B scale costs against the first defendant. Against the second defendant, which has not engaged with the proceedings, 2B scale costs are sought, along with disbursements. The first defendant submits costs should be reserved until the substantive proceedings are concluded but, if they are determined, they should be at scale.

Costs principles

[3]                   The application for interim injunctions was an interlocutory proceeding and costs must be fixed now, unless there are special reasons not to do so.2

[4]                   Increased and indemnity costs are governed by r 14.6 of the High Court Rules 2016. Indemnity costs may be imposed if, for example, a “party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding”.3 Increased costs may be imposed if, “the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it” including by “failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument”.4 Regardless of the approach taken, an award of costs should not exceed actual costs incurred by a party.5

1      Stewart v Milano International 2007 Ltd [2018] NZHC 2207.

2      High Court Rules 2016, r 14.8(1).

3      Rule 14.6(4)(a).

4      Rule 14.6(3)(b)(ii).

5      Rule 14.2(1)(f).

The competing contentions

[5]                   Ms Hollings, for the plaintiffs, argues the plaintiffs were put to unnecessary expense by the first defendant’s actions. Having filed a notice of opposition and two affidavits in reply, she submits the first defendant consented to the injunctions in almost identical terms to those sought on the afternoon before the hearing. Between those times, the use of a driveway (in respect of which the injunctions were sought) continued, despite the first defendant having been on notice to the plaintiffs’ complaint about that use. In Ms Hollings’ submission, the injunctions were unobjectionable on their terms and the very fact they were consented to illustrates the interlocutory application was unnecessary.

[6]                   The second defendant is in liquidation. Ms Hollings argues its failure to consent to the interim injunctions and lack of address for service have put the plaintiffs to additional costs. They seek 2B scale costs for the Court appearance before Whata J and disbursements. The second defendant has not made submissions.

[7]                   Mr Taylor, for the first defendant, argues the similarity between the injunctions granted and the ultimate relief sought is reason for the costs award to be reserved. On the issue of increased or indemnity costs, Mr Taylor raises two points. First, he argues the orders granted differed from those originally sought (so the similarity the plaintiffs claim cannot be grounds to increase costs). Second, he argues inaccuracies and omissions in the evidence filed by the plaintiffs required a response. Mr Taylor ultimately submits this case is not within the exceptional class of cases discussed in Bradbury v Westpac Banking Corp that requires indemnity costs.6 On the issue of an increase to scale costs, Mr Taylor submits scale costs almost fully compensate the plaintiffs so no uplift should be awarded.

Costs against first defendant

[8]                   I do not consider the similarity of the relief ordered on this interlocutory application to that sought in the statement of claim is a “special reason” not to fix costs at this point.7 I therefore propose to follow the usual course and determine costs now.

6      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400.

7      High Court Rules 2016, r 14.8(1).

Further, and in any event, the Court has a residual discretion to “reverse, discharge, or vary” costs on interlocutory applications if satisfied the original order should not have been made.8

[9]                   The plaintiffs have sought costs for commencing the proceedings. In my view that is inappropriate. Only costs incidental to the interlocutory application itself may be sought at this stage. Costs for commencing the proceedings will ordinarily be determined when the substantive proceedings are determined. The result is that the

6.15 days sought should be reduced to 3.15 days.

[10]               I am not satisfied the first defendant has behaved so poorly as to justify indemnity costs. The Court of Appeal in Bradbury v Westpac Banking Corp summarised the distinction between the three broad costs approaches as follows:9

(a)standard scale applies by default where cause is not shown to depart from it;

(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and

(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.

[11]               As the Court explained, “[c]lear cause must be shown to justify an increase.”10 I accept Mr Taylor’s submission that there were material differences between the orders sought and granted. As sought, the second order, for example, would have prevented heavy vehicles from passing along an easement along which they are entitled to pass. In his judgment, Whata J acknowledged taking that difference into account.11 It was not “very unreasonable” for the first defendant to oppose, in principle, that order.

[12]               But I do not accept Mr Taylor’s argument that because scale costs and actual costs are so close there should be no uplift.12 Plainly an uplift is designed to recognise

8      Rule 14.8(2).

9      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

10 At [28].

11     Stewart v Milano International 2007 Ltd [2018] NZHC 2207 at [4].

12     Excluding disbursements, actual costs sought on an indemnity basis are $13,968.50. The scale costs originally sought (without disallowing the first step) were $13,157.

the behaviour of the unsuccessful party as having been unreasonable. I am satisfied that is the case here. The plaintiffs’ application for an interim injunction was strong, especially on the trespass cause of action. I accept Ms Hollings’ submission that in material respects the defendants appear to have continued their actions with their “eyes wide open” to the claims against them. That much is clear from their receipt of correspondence since 2016 informing the defendants of trespass issues. The affidavits provided in opposition (before the injunction was consented to) do not provide any reasonable justification or acknowledgement of those issues. I am satisfied that under r 14.6(3)(b)(iii) the first defendant has failed to accept what appears to be a good legal argument for an injunction to be granted, until the 11th hour before the hearing. Doing so contributed unnecessarily to the plaintiffs’ costs.

[13]               Mr Taylor is correct that the orders granted differed from those sought, which I consider sufficient to render indemnity costs inappropriate. However, through constructive engagement between the parties, those differences may well have been resolved without contributing unnecessarily to the time and expense involved in seeking the injunctions.

[14]               I consider an uplift of 20 per cent to be appropriate. Against the 3.15 days at 2B scale, the final figure reached is $8,429.40. The actual disbursements sought by the plaintiffs against the first defendant have not been challenged and should be awarded.

Costs against second defendant

[15]               Ms Hollings advises the second defendant was placed into liquidation on 16 July 2018. That was after the first call in this matter but prior to the application for interim injunctions. Unless a liquidator agrees, or the court orders otherwise, a person cannot commence or continue legal proceedings against a company in liquidation.13 It is not apparent that this was brought to the attention of Whata J prior to his judgment (though no orders were made against the second defendant). The fact the second defendant is in liquidation was omitted from the application for interim orders, for example. I am not persuaded on the materials currently before me that the application

13     Companies Act 1993, s 248(1)(c)(i).

was properly brought and I consider it necessary to reserve leave for the plaintiffs to file additional submissions on this topic, should they wish to pursue costs against the second defendant.

Conclusion and orders

[16]               The first defendant is to pay the plaintiffs costs of $8,429.40 and the actual disbursements sought in [10] of the plaintiffs’ submissions on costs dated 31 August 2018.

[17]               If costs are pursued against the second defendant, the applicants may file further submissions within 10 working days of the receipt of this judgment. The second defendant may file any submissions within a further five working days. Memoranda should not exceed three pages. Costs will be determined on the papers.

[18]               Counsel for the plaintiffs is to ensure a copy of this judgment is brought to the second defendant’s attention (via its liquidator).

Fitzgerald J