Stylo Medical Services Limited v Hum Hospitality Limited

[2018] NZHC 1252

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-600 [2018] NZHC 1252

UNDER

the Property Law Act 2007

IN THE MATTER

of an application under section 261 for relief against refusal to renew a lease

BETWEEN

STYLO MEDICAL SERVICES LIMITED

Plaintiff

AND

HUM HOSPITALITY LIMITED

Defendant

Hearing:

On the papers

Counsel:

R O Parmenter for plaintiff

M Eastwick-Field and C E Grenfell for defendant

Judgment:

31 May 2018

JUDGMENT OF KATZ J

[Costs]

This judgment was delivered by me on 31 May 2018 at 10:30am pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:      Winston Wang & Associates

Russell McVeagh, Auckland

Counsel:       R O Parmeter, Barrister, Auckland

STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2018] NZHC 1252 [31 May 2018]

Introduction

[1]                 On 11 April 2018, I delivered my decision in relation to this matter. I allowed Hum Hospitality Limited’s (“Hum”) application for relief against Stylo Medical Services Limited’s (“Stylo”) refusal to renew its lease.1

[2]                 Hum seeks costs and disbursements in respect of its successful application. It seeks $10,369.50 for costs on a 2B basis, and $10,287.05 plus GST for disbursements.

Costs

[3]                 The parties have agreed that Stylo will pay Hum’s costs on a 2B basis, as set out below:

Item	Steps for application for relief under s 261 of the Property Law Act 2007	Allocated days
11	Filing memorandum for first or subsequent case management conference or mentions hearing (x2)	0.8
12	Appearance at mentions hearing or callover (x2)	0.4
22	Filing interlocutory application	0.6
24	Preparation of written submissions	1.5
25	Preparation by applicant of bundle for hearing	0.6
26	Appearance at hearing of defended application for principal counsel	0.75
Total claimed days: Subtotal (at $2,230 per day)		4.65
		$10,369.50

1      Stylo Medical Services Ltd v Hum Hospitality Ltd [2018] NZHC 642.

Disbursements

[4]                 In relation to disbursements, the parties cannot agree. In its costs memorandum of 27 April 2018, Hum seeks the following disbursements:

Disbursements	Fees
1	Engagement of Heidi van Eeden, Veron Building Consultants Limited	$3,877.75 plus GST
2	Engagement of Nigel Emmitt, Emmitt Consultants Limited	$3,500.00 plus GST
3	Engagement    of    Frank    Micallef,    Fire Engineer, Chester	$2,909.30 plus GST
Subtotal:		$10,287.05 plus GST

[5]                 Stylo’s costs memorandum of 3 May 2018 does not engage with Hum’s costs memorandum. Instead it responds to an earlier Russell McVeagh letter of 20 April 2018 in which disbursements of $18,119.19 were sought. That claim, however, was not pursued in Hum’s costs memorandum of 27 April 2018. Rather, a reduced disbursement sum of $10,287.05 plus GST is sought. The discrepancy is attributable to greater sums previously being claimed in relation to each expert witness identified in the above table. In addition, it appears that a disbursement was also previously sought for the services of James Kidd (an accountant) of K H Consulting Ltd. That is no longer sought.

[6]  I proceed on the basis of the reduced sum now claimed by Hum. I consider the submissions of Mr Parmenter, for Stylo, insofar as they are relevant to Hum’s updated disbursements schedule.

Relevant law

[7]                 An expert witnesses’ expenses must be approved by the Court to be claimed.2 The witnesses’ disbursement, if claimed and verified, must be included in the costs award to the extent that it was specific to the conduct of the proceeding, necessarily incurred and reasonable in amount.3

Should Mr Micallef ’s first invoice be included as a disbursement?

[8]                 Mr Parmenter submits that Mr Micallef was consulted by Hum for the express purpose of dealing with a Notice to Fix that was issued by the Auckland Council in relation to the leased property.   Mr Parmenter submits that the first invoice from   Mr Micallef was concerned with the Notice to Fix, and not with the litigation between the two parties. On that basis, he submits Stylo should not have to pay those fees (which amount to $2,300 (GST included)). He accepts the fees in Mr Micallef’s second invoice, which relate to Mr Micallef reviewing his affidavit and signing it. Therefore, Mr Parmenter submits Stylo should only have to pay the fees in the second invoice, in the sum of $1,045.70 (GST included).

[9]                 Hum submits that it needed to rely on Mr Micallef’s assessment to establish that Hum was using the premises lawfully, and failing to produce that report would have prejudiced its application against Stylo as it needed to establish its lawful use of the premises to support its “good tenant” status.

[10] The Notice to Fix was issued by the Auckland Council on 30 May 2017. In the notice of opposition by Stylo against Hum’s application for relief, dated 22 June 2017, Stylo submitted that Hum was using the leased property as a “crowd small” premises, which was in breach of the Building Act 2004 as it was only allowed to be used as a “single sleeping home”. This was the same breach said to have occurred in the Notice to Fix issued by the Auckland Council.

2      High Court Rules 2016, r 14.12(2)(a). This is on the basis that expert costs do not fall within any of the categories within r 14.12(1)(b).

3      High Court Rules 2016, r 14.12(2)(b)–(d).

[11] Mr Micallef was engaged by Hum to undertake a fire engineering assessment of Hum’s use of the premises by way of a report that addressed the Notice to Fix. His affidavit, sworn 7 July 2017, annexed the report he had provided, in which he opined that there was no change of use of the premises, and therefore no breach of the Building Act.

[12]              Ms  Armitage,  of  Hum,  later   provided   an   updating   affidavit,   sworn 19 September 2017, which showed that the Auckland Council considered the Notice to Fix was being complied with as a result of a change of use to the property being permitted.

[13] The Notice to Fix was issued after the proceeding commenced. Stylo put it in issue by claiming that Hum was a bad tenant because (amongst other things) its use of the building was unlawful. Mr Micallef’s report was relevant to this point as it addressed whether Hum’s use was in breach of the Building Act. In that sense, Mr Micallef’s fees were specific and relevant to the proceeding. His report was relevant to Hum’s defence against Stylo’s claim that it was a bad tenant. Further, in order for Mr Micallef’s later fees relating to the signing of his affidavit to be incurred, he needed to have evaluated the building and assessed whether it complied in order to provide his opinion. I therefore consider his fees included in both invoices are properly claimable as disbursements. I am also satisfied that his fees are reasonable in amount.

Should Mr Emmitt’s expenses be included as a disbursement?

[14]              Mr Parmenter submits that Mr Emmitt’s involvement was completely unnecessary. Mr Parmenter submits that it was not reasonable to have two quantity surveyors provide affidavits for Hum, especially when one, Ms van Eeden, was critiquing Mr Emmitt’s earlier assessment. Ms van Eeden compared the valuations given by Mr Emmitt and by Mr Nixon (the quantity surveyor for Stylo) in 2014.    Mr Parmenter also submits that it is relevant that it was agreed that a court-appointed quantity surveyor would consider the differences between Mr Emmitt and Mr Nixon’s assessments and provide his own report.

[15]              Ms van Eeden’s affidavits, and the valuations attached to them, were based solely on the valuations performed by Mr Emmitt and Mr Nixon (the quantity surveyor for Stylo) in 2014. In her reply affidavit, affirmed 10 July 2017, Ms van Eeden states that her report “should be read as providing [her] opinion only of the value of works undertaken as at the dates of Messrs Nixon’s and Emmitt’s affidavits” from 2014.

[16]              Mr  Emmitt  had  valued  the  investment   as   being   $659,000   in  2014. Mr  Emmitt’s  latest  valuation,  dated  6  July  2017,  valued  Hum’s   investment  as

$694,000.

[17]              Hum did not refer to Ms van Eeden’s evidence at all in its submissions for the substantive hearing. It is not surprising therefore, that her evidence was not referred to in my Judgment. Rather, I referred to Mr Emmitt’s 6 July 2017 valuation. I also referred to Mr Nixon’s valuation of $94,253 (plus GST). As noted by Mr Parmenter, I ultimately relied on the Court-appointed quantity surveyor’s (Mr Hanlon’s) opinion, given the discrepancy between Mr Emmitt and Mr Nixon’s assessments.

[18]              In these circumstances, while Mr Parmenter submits that he accepts Ms van Eeden’s costs, and contests Mr Emmitt’s, I consider that it is Ms van Eeden’s expenses that were unnecessary for the proceeding. Mr Emmitt’s report, on the other hand, was specific and necessary for the proceeding, particularly given Mr Hanlon’s reference to it. I am also satisfied that his claimed expenses are reasonable. I therefore consider that Mr Emmitt’s costs may be claimed as disbursements, but Ms van Eeden’s may not.

Should GST be included in the order for disbursements?

[19]              While this issue has not been raised by either party, an award of disbursements should not include GST if the successful party is GST registered.4 There is no evidence regarding whether Hum is GST registered, but given its status as a company, I would assume that it is. Based on that assumption, the disbursements claimed should not include GST.

4      New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016) 27 NZTC 22-058 at [13]; [17].

Result

[20]              I order that Stylo pay costs to Hum in the sum of $10,369.50, together with (GST exclusive) disbursements of $6,409.30 (totalling $16,778.80). In the event that Hum is not GST registered, I direct that it is entitled to also recover the GST component of Mr Emitt’s and Mr Micallef’s fees.

Katz J