Takapuna Residence Development Limited v Dixon

[2023] NZHC 1668

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-001423

[2023] NZHC 1668

BETWEEN

TAKAPUNA RESIDENCE DEVELOPMENT LIMITED
First Plaintiff

EDEN GP LIMITED
Second Plaintiff

EDEN DEVELOPMENT NO.1 LP
Third Plaintiff

AND

PETER ANDREW DIXON and MARGARET JOAN DIXON

Defendants

Hearing:

On the papers

Appearances:

A J Casey for the Plaintiffs

W McCartney for the Defendants

Judgment:

30 June 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by Associate Judge Gardiner

on 30 June 2023 at 3.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar / Deputy Registrar – Date: ………………………………..

Solicitors:

Duncan King Law, Auckland Duthie White, Auckland

W McCartney, Auckland A J Casey, Auckland

TAKAPUNA RESIDENCE DEVELOPMENT LTD v DIXON [2023] NZHC 1668 [30 June 2023]

Introduction

[1]        In a judgment delivered on 27 March 2023, I entered summary judgment for the first plaintiff  against  the  defendants  for  $342,825.35,  including  interest  to  21 February 2023.1

[2]        The plaintiffs now seek $23,264.51 by way of increased or indemnity costs pursuant to r 14.6 of the High Court Rules 2016.

Submissions

[3]        The plaintiffs rely on three grounds. First, that the defendants failed, without reasonable justification, to accept an offer of settlement. The plaintiffs say that prior to filing the proceeding in August 2022, they made several requests for the defendants to repay the GST amount to avoid the need for proceedings. On 27 October 2022, the plaintiffs made a Calderbank offer to accept $340,000, an amount less than what they were awarded by the judgment. The plaintiffs say they also wrote to the defendants on 22 June 2022 requesting repayment of the GST and accounting fees, plus interest accrued to that date. They say that amount was also less than what the first plaintiff was awarded.

[4]        Second, the plaintiffs submit that the defendants pursued arguments that lacked merit and/or failed to accept legal argument. They say that it should have been clear to the defendants from the outset that their defence was completely without merit. They refer to s 60B of the Goods and Services Tax Act 1985 and the comparable authorities of the Ling and Park Homes.2 The plaintiffs submit that their letters set out the basis on which they considered that the defendants had no defence to the claim, being the basis on which they were ultimately successful.

[5]        Third, the defendants acted vexatiously or unnecessarily in defending the proceeding. The plaintiffs point out that in the defendants’ notice of opposition dated 13 October 2022, the defendants only disputed part of the claim, while acknowledging

1      Takapuna Residence Development Ltd v Dixon [2023] NZHC 624.

2      YL NZ Investment Ltd v Ling [2017] NZHC 1793, upheld in Ling v YL Investments Ltd [2018] NZCA 133, (2018) 20 NZCPR 830; and Park Homes Ltd v Miah [2022] NZHC 1352.

that they had no defence to the balance of around $265,000. Despite that, they did not pay that amount. The plaintiffs submit that the defendants have acted unreasonably and unmeritoriously in the Bradbury sense, and an award of indemnity costs, or at least substantially increased costs, is warranted.

[6]        The defendants refute these submissions. They submit that they acted responsibly by admitting, in the first document they filed (their notice of opposition), that they had no defence to either the claim based on the GST component of $1,950.00 or the plaintiffs’ accounting costs. That amounted to an admission of $260,737, which was 78 per cent of the plaintiffs’ claim. They submit that if anything they are entitled to credit for this responsible admission. They say they had no obligation to pay this part of the claim, pointing out that the plaintiffs could have asked for judgment to be entered for the admitted part of the claim at the first call of the summary judgment application pursuant to r 15.15 of the High Court Rules 2016 or subsequently, but did not. Furthermore, at no time after the defendants’ admission did the plaintiffs demand payment of the admitted amount.

[7]        The defendants say that they reasonably believed that the plaintiffs were not entitled to the disputed amount. Therefore, it was reasonable for them not to volunteer payment of this sum of money, knowing that the plaintiffs would use the money to pursue them for the disputed amount. In any event, non-payment of the admitted amount had no effect on the plaintiffs’ costs, as there would still have needed to be a hearing on the disputed amount meaning the time and costs of the hearing would have been the same.

[8]        The defendants dispute that there was clear legislative and judicial authority for the plaintiffs’ claim, saying that prior to the judgment in question there was no authority to the effect that the plaintiffs were entitled to the disputed amount. They say that none of the cases relied on by the plaintiffs directly addressed the situation in this case, where a plaintiff had neither claimed an input tax credit in respect of the deposits, nor apparently intended to. They say there was therefore nothing unreasonable about the defendants’ defence of the dispute amount.

[9]        The defendants say that the October 2022 settlement offer by the plaintiffs included the admitted amount, the disputed amount, and an additional amount for interest and/or costs. They say that it was not unreasonable for them to reject this offer when they considered that they had a reasonably arguable defence concerning the disputed amount.

[10]      The defendants submit that the Court should reduce the scale costs awarded to the plaintiffs, for a range of reasons including the lack of transparency about who had paid each deposit, and the unmeritorious claim for contractual interest, which unnecessarily increased the defendants’ cost.

Assessment

[11]      I do not consider that an order of increased or indemnity costs is warranted. First, I do not consider that the defendants can be criticised for rejecting an offer of settlement that was more than the undisputed and disputed amounts together. I accept that such an offer was objectively not attractive to the defendants, assuming they believed they had a valid defence to the disputed amount.

[12]      Nor do I accept that the defendants acted unreasonably or unmeritoriously in a Bradbury sense. Indemnity costs are awarded where a party has behaved either badly or very unreasonably.3 Indemnity costs can be awarded where a party’s case was obviously “hopeless”. “Hopeless” in this context means “totally without merit” and “bound to fail”.4

[13]      While summary judgment was entered against the defendants, their defence was not hopeless. They are correct that in neither Ling or Park Homes the nominee had attempted to obtain an input credit for the GST portion of the entire purchase price. It is correct therefore that none of the cases the plaintiffs relied on directly addressed the situation where a plaintiff had neither claimed an input tax credit in respect of the deposits, nor, apparently, intended to.

3      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27]–[28].

4      TheCircle.co.nz Ltd v Trends Publishing International Ltd (in liq and rec) [2021] NZCA 235 at [34].

[14]      Nor are increased costs justified. Increased costs are ordered where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding, or step in it, by taking or pursuing an unnecessary step or an argument that lacks merit. The issue is the extent to which the failure to act reasonably contributed to the time or expense of the proceeding. Only to that extent should any percentage uplift from scale be awarded.5 Putting aside their decision to defend the application with respect to the disputed amount, which I have concluded was not “hopeless” the defendants did not take or pursue any step that increased the time or expense involved.

[15]      In summary, there was nothing unusual in this case warranting increased or indemnity costs. As the successful party the plaintiffs will receive their costs according to scale.

[16]      I decline to reduce the scale costs awarded to the plaintiffs because of their claim to contractual interest. While this was a novel claim, I do not accept that it contributed materially to the time or expense of the proceeding.

Result

[17]I award the plaintiffs scale 2B costs of $16,252, plus disbursements of

$1,347.01.

Associate Judge Gardiner

5      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].