Takanini Central Residential Limited v Terra Group NZ Limited
[2016] NZHC 2179
•15 September 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-000860
CIV-2015-404-000861
CIV-2015-404-001165
CIV-2015-404-001166
[2016] NZHC 2179
BETWEEN TAKANINI CENTRAL RESIDENTIAL
LIMITED Applicant
AND
TERRA GROUP NZ LIMITED Respondent
AND
THE GROVE LAND COMPANY LIMITED
Applicant
AND
TERRA GROUP NZ LIMITED Respondent
Hearing: 18 June 2015 Appearances:
S C Price and J H Morrison for both Applicants
A Barker for the RespondentJudgment:
15 September 2016
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 15 September 2016 at 11.00 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Minter Ellison, Auckland
Graham & Co, Auckland
A Barker, Auckland
TAKANINI CENTRAL RESIDENTIAL LTD v TERRA GROUP NZ LTD [2016] NZHC 2179 [15 September 2016]
[1] Terra Group Ltd issued statutory demands against The Grove Land Company Ltd and Takanini Central Residential Ltd in respect of civil engineering works on two large residential developments. Grove and Takanini applied to set those demands aside. In the judgment I delivered on 24 March 2016 I made orders to the effect that the statutory demands would stay (in reduced amounts) and associated orders. I also gave leave to file memoranda as to costs, giving a preliminary indication that was not to be taken as determinative.
[2] Terra now seeks costs on both applications. Grove and Takanini seek that costs lie where they fall, or (assuming an award) that any award is adjusted to compensate Terra for one set of submissions and not two, as only one set was prepared.
[3] There is no dispute that if an award is made, it should be for costs assessed on a 2B basis, and that such costs (on the two applications taken together) total $18,952, inclusive of disbursements.
[4] There is a remaining issue as to costs which has been raised by Grove and Takanini in respect of two additional applications to set aside statutory demands made against them by Terra. These applications are filed under CIV-2015-404-001165 and CIV-2015-404-001166. I put this issue aside momentarily and deal first with the matter of costs reserved in the judgment issued on 24 March 2016.
Costs in CIV-2015-404-000860 and CIV-2015-404-000861
Terra’s submissions
[5] Terra submits as follows:
(a) The result of the judgment was that the statutory demands were set aside roughly as to 50 per cent in particular:
(i)The demand issued against Grove was for $196,370. It was upheld as to $93,298.45 (48 per cent of the claimed amount).
(ii)The demand issued against Takanini was for $60,905.60. It was upheld as to $32,982.85 (54 per cent of the claimed amount).
(b)Having regard to the substance of the issues that were determined, Terra enjoyed a substantial degree of success. It was successful on the substance of most of the disputed invoices. The extent to which it was unsuccessful was driven to a significant degree by a few invoices that were large in amount, but did not occupy a significant amount of the hearing time (or preparation).
(c) In such circumstances, an award of costs in Terra’s favour is
appropriate.
(d)If the Court were minded to recognise in some way the limited success by Grove and/or Takanini, the appropriate way of doing that would be to make a percentage reduction against scale costs.
[6] Counsel for Terra submits that the basic approach to costs where there has been a degree of success for both parties is set out in the decision of the Court of Appeal in Packing In Ltd (in Liq) v Chilcott.1 In circumstances not dissimilar to those involved in an application to set aside a statutory demand, the Court described the approach as follows:
[6]… Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focussing on who initiated what step, and the extent to which that step succeeded or failed.
[7] Counsel has also referred me to a number of other decisions on costs2, and submits, to the extent it is possible to extract general principles from them, that:
1 Packing In Ltd (in Liq) v Chilcott (2003) 16 PRNZ 869.
2 Two examples referred to by counsel are:
(i) Amstar Interiors Ltd v AUS Insulation Ltd (in Liq) HC Auckland, 8 September 2011. Statutory demand of $20,036.26 reduced to $11,830. Indication from the Court that despite the reduced demand, the respondent was successful in substance (at [41]).
(ii) Trelise Cooper Ltd v Cooper Watkinson Textiles Ltd HC Auckland, CIV-2007-404-4307,
4 November 2008). Statutory demands reduced by 25%. On a consideration of the substantive degree of success on the issues, 2B costs reduced by 30%.
(a) There is “a prejudice” in favour of awarding costs to a respondent even when the statutory demand is set aside as to part. The reason is that the substance of the application is to set aside a statutory demand. On that issue, the applicant has not succeeded because the demand remains in force (albeit at a reduced quantum).
(b)The Court will consider, however, the substance of the dispute and how it was determined. If there was a true equality of result then costs may lie where they fall. The Court may also, rather than making a full award of costs, make some proportionate reduction to reflect the degree of success.
Grove and Takanini’s response
[8] Counsel for Grove and Takanini accepts that the correct approach is that set out in the Packing In decision, but he argues that there is no principle that recognises “a prejudice” in favour of awarding costs to a respondent where a statutory demand is set aside in part. He submits that in the present case a realistic appraisal of the end result points to equal measures of success, but that if this is not accepted, that there should be a reduction in the scale award for submissions in order to avoid duplication.
Legal principles
[9] Pursuant to High Court Rule 14.1, all matters relating to costs are at the discretion of the Court. Such matters are, however, to be approached in a principled way. It is trite law that the general principles in r 14.2 are to be followed unless there are particular relevant circumstances that justify a departure in the exercise of the Court’s overall discretion.
[10] Relevantly, under r 14.2 as a matter of general principle a party who fails with respect to a proceeding should pay costs to the party who succeeds, and as far as possible the determination of costs should be predictable and expeditious. However, despite the principle that the determination of costs should be predictable
and expeditious, the Court has a discretion under r 14.7 to take into account reasons that may justify refusing or reducing costs.
[11] In United Homes (1988) Ltd v Workman the Court of Appeal found that costs had to be tempered because the appeal had succeeded in a substantial part, but not entirely.3 The appellants in that case had failed on one of the two crucial issues and were awarded one sum of $1,000 in costs against all respondents, together with disbursements and reasonable travelling and accommodation expenses of counsel as agreed or failing agreement as approved by the Registrar.
[12] In Packing In Ltd (in liq) v Chilcott,4 three out of fourteen transactions were declined, and each party sought costs submitting that it had succeeded in its claims. The Court of Appeal in [5] said:
[5] In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all the material features of the case.
[13] As I have noted above, the Court of Appeal also opined that “success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed”.5
Assessment
[14] The objective of the applications was to obtain orders setting aside the statutory demands in their entirety; and the application failed in that objective.
I agree with counsel for Terra that there was no substance in that objective – Grove
3 United Homes (1998) Ltd v Workman [2001] 3 NZLR 447 (CA).
4 Packing In Ltd (in liq) v Chilcott above, n 1.
5 At [6].
and Takanini knew or should have known that a significant portion of what was claimed in the statutory demands was plainly payable and not open to dispute. Had they acknowledged that position as and when they received invoices (instead of simply withholding payment), they would likely never have been faced with the demands. The evidence before the Court indicates that they were given considerable latitude by Terra which was prepared at different times to write off a modest amount of the costs claimed, and to engage in a disputes resolution procedure to resolve a number of others. Instead, Grove and Takanini adopted the rather intransigent position that there was to be a significant reduction in the overall amount claimed, or there would be nothing paid; and it made plain it was not attracted to the suggestion that there be a disputes process. Its position suggested a degree of intransigence that was unjustified.
[15] Terra’s resort to the statutory demand procedure was, in such circumstances, reasonable, and as the overall result indicates it was entitled to maintain the demands, albeit in reduced amounts. As against that position, however:
(a) There are clear indications in the evidence that Terra was aware that some of the invoices were indeed the subject of a tenable dispute, and should not have been the subject of its statutory demands; and
(b) From the perspective of quantum, Grove and Takanini’s success was
not insubstantial.
[16] The real issue is therefore what result would do justice to both sides.
[17] I find that Terra was the more successful party in these applications, and that it is material that the statutory demands were demonstrably justified, albeit in reduced amounts. It is also material that:
(a) Grove’s arguments as to liability were substantially rejected in respect of various invoices, but the arguments as to liability occupied a significant part of the hearing (and were a key component of the supporting evidence).
(b)If the issues of live/work is excluded, Terra essentially succeeded on all aspects (and most invoices) involved in the application. The issue of live/work is not a real reflection of the breadth of issues that were covered in the evidence, or that had to be worked through at Court.
(c) The fact that interest claims were set aside does not indicate substantial failure on Terra’s part. The refusal to allow interest was simply a product of the reduction allowed in the amount claimed on various invoices. Contract interest on the amounts allowed is clearly payable, and the relevant amount of interest is simply a matter of quantification.
[18] Taking a realistic appraisal of the end result for each party and the relative effort, and balancing the various factors, I am satisfied that it would not be appropriate to leave costs to lie where they fall.
[19] In my assessment Terra has enjoyed the greater measure of success, and it is entitled to some measure of compensation in recognition of that. But the applicants’ partial success and the effort they had to expend to secure the relevant concessions should not go unrecognised. Ultimately, it is a matter of impression as to what reduction from scale costs is appropriate. I think an appropriate result is to allow costs to the respondent, but on a reduced basis. I see no need to make a further reduction for submissions. Though contained in one document the submissions were in reality submissions on two distinct applications. Following the approach in
United Homes I think an appropriate reduction is 30 per cent.6
Result
[20] I order that the applicants are to pay to Terra costs in the sum of $13,112.40 (calculated at 70 per cent of 2B costs of $18,732) plus disbursements of $220.
6 United Homes (1998) Ltd v Workman, above n 3.
Costs in CIV-2015-404-001165 and CIV-2015-404-001166
[21] I turn next to a remaining issue of costs. It relates to two further statutory demands that Terra issued, one against Grove, and the other against Takanini. These were the subject of applications for orders to set them aside which were filed on
27 May 2015, in each case together with a brief supporting affidavit. At the commencement of the applications filed in CIV-2015-404-000860 and CIV-2015-404-000861 it was agreed that the appropriate course was to defer the hearing of these new applications pending judgment on the original applications. Once judgment was issued, counsel advised the Court that there was no longer a need to hear argument on the new applications. As the position was conveyed to me, the parties had taken guidance from the judgment and had been able to settle arrangements to deal with remaining disputes.
[22] The result was that the statutory demands were withdrawn, but the parties were unable to agree on costs.
[23] Grove and Takanini submit that on the basis that the applications were withdrawn, they are prima facie the successful parties and are entitled to an order for
2B costs of $9,320 plus disbursements of $1,080. Counsel also submits that the subject invoices were for debts not yet due at the date of service of the demands, a point that Terra has failed to respond to in any substantive way. I am satisfied that there is substance in the submission made on behalf of Grove and Takanini that on
that basis the demands would have been set aside pursuant to s 289(2)(a).7 Were it
not for this point, there might be some merit in Terra’s contention that the approach
urged by counsel for Grove and Takanini would be to ignore the reality of the position and the context in which the statutory demands were withdrawn.
7 Amalgamated Builders Ltd v Nile Holdings Ltd (HC, Invercargill M13/00, 8 May 2000) at para [14].
[24] In the circumstances, I think it appropriate to allow costs to Grove and Takanini. However, I accept the submission made by counsel for Terra that a time allowance on a Band B basis would be excessive. I allow costs on a 2A basis (being
2 days at $2,330) plus disbursements claimed of $1,080, making a total of $5,740.
Associate Judge Sargisson
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