Target Painters & Decorators Limited v Omid Construction Management Group Limited

[2019] NZHC 2757

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-001607

[2019] NZHC 2757

BETWEEN

TARGET PAINTERS & DECORATORS LIMITED

Applicant

AND

OMID CONSTRUCTION MANAGEMENT GROUP LIMITED

Respondent

Hearing:	On the papers
Counsel:	M R T Colthart for Applicant J McBride for Respondent
Judgment:	29 October 2019

COSTS JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 29 October 2019 at 3.30 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

……………………………

TARGET PAINTERS & DECORATORS LTD v OMID CONSTRUCTION MANAGEMENT GROUP LTD [2019] NZHC 2757 [29 October 2019]

Introduction

[1]                In my judgment of 7 October 2019 (re-issued 11 October 2019),1 I dismissed the applicant’s application to set aside the statutory demand.

[2]                The respondent now seeks costs on a 2B basis, together with a 50 per cent uplift (a total of $18,931.25, including disbursements). The respondent seeks an order for costs against both the applicant and against Mr Sek Yin Sid Cheah, a non-party, and the person said to be standing behind the applicant which is now presumed to be insolvent.

[3]                The applicant accepts that the respondent, as the successful party, is entitled to costs but opposes any order for increased costs and any order that Mr Cheah be liable for costs. The applicant contends that on a 2B basis the respondent should be awarded costs in the total amount of $12,069.50.

[4]                The critical issues I must determine are whether there is a basis for an increased costs award (and if so, how much) and whether I should make a costs order against both the applicant and Mr Cheah.

Relevant legal principles

[5]                Increased costs may be ordered pursuant to r 14.6 where there is a failure by the paying party to act reasonably.2

[6]                The Court should consider the extent to which the failure to act reasonably contributed to the time or expense of the proceedings. Only to that extent can any percentage uplift from scale be justified.3

[7]                Taking or pursuing an entire claim that lacks merit can warrant increased costs. In Jarden v Lumley General Insurance (NZ) Ltd,4 the Court of Appeal upheld a High

1      Target Painters & Decorators Ltd v Omid Construction Management Group Ltd [2019] NZHC 2544.

2      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) at [27].

3      Commissioner of Inland Revenue v Chesterfields Pre-schools Ltd [2010] NZCA 400, (2010) 24 NZTC 24,500 at [165].

4      Jarden v Lumley General Insurance [2018] NZCA 6.

Court costs judgment, awarding a 25 per cent uplift on 2B costs where the plaintiffs’ (earthquake insurance) claim was pursued without proper justification, with key allegations unsupported by the plaintiffs’ experts.

Analysis and decision

Increased costs

[8]                I accept Mr Colthart’s submission that in my substantive judgment I did conclude that the jurisdictional argument had some merit. However, the arguable jurisdictional error was devoid of any real consequence; judicial review is concerned with material errors of law and no arguable material error was made out. I also noted that the jurisdictional error was only one of the grounds in the judicial review proceedings – and I ultimately reached the view that the applicant was relying on technical and essentially meritless arguments seeking to set aside the statutory demand and to avoid its obligations under the Construction Contracts Act 2002.

[9]                It would have been apparent to the applicant from the existing jurisprudence that the threshold for judicial review in the context of the Construction Contracts Act 2002 is a high one. Against that background, the applicant failed to produce evidence that it is in any real way prejudiced by the “pay now and argue later” philosophy of the legislation or (apart from bare allegations) that its judicial review proceedings would be rendered nugatory if the statutory demand were not set aside.

[10]            I also concluded in my substantive judgment that the other grounds of judicial review, including lack of valid service and failing to consider and grant the applicant’s application to correct errors, lacked merit and were essentially “makeweight”.

[11]            In the circumstances, I am satisfied that the respondent has established that the applicant did act unreasonably in pursuing its claims without proper justification and failed to provide sufficient evidence to address, what I regarded as a critical issue, whether substantial prejudice could be established.

[12]            As to the extent of any uplift, I am of the view that the applicant should pay to the respondent costs on a 2B basis with an uplift of 25 per cent and not 50 per cent as

sought by the respondent. I see this case as similar to Jarden v Lumley.5 In my view, this is a different case from York Trustees Ltd v Body Corporate 166208,6 where the application to set aside a statutory demand was withdrawn at the hearing (reinforcing the lack of merit)7 and there had been significant non-compliance with the timetable orders.

[13]            I do, however, accept the submission of the respondent that s 59(2)(a)(ii) of the Construction Contracts Act 2002 does provide support for its claim increased costs and does have some similarities with s 124 of the Unit Titles Act 2010, a provision relied on by Hinton J in York Trustees Ltd v Body Corporate 166208.8

[14]            I reject the contentions of the applicant that there should be some reduction of costs pursuant to r 14.7(f)(2) on the basis of what the applicant says were unfounded allegations in relation to the evidence of Mr Cheah and the role of counsel and the solicitors for the applicant. Mr Cheah did make an error in his first affidavit and the allegations against counsel and the solicitors were not pursued at the hearing.

Costs against Mr Cheah as a non-party

[15]            The general discretion as to costs contained at r 14.1 of the High Court Rules permits the Court to award costs against non-parties to litigation.9

[16]            In Haines v Memelink,10 Churchman J noted that the authorities support an award of costs against a non-party who might be the “real party” to litigation, particularly where a company litigant is insolvent, or the claim is hopeless or pursued improperly.11

[17]            I accept the submission of Mr Colthart that the Haines v Memelink decision is quite different from the present case. In Memelink, costs were awarded against an individual who knowingly and willingly acted as a “acolyte” for his brother-in-law (an

5      Jarden v Lumley General Insurance, above n 4.

6      York Trustees Ltd v Body Corporate 166208 [2017] NZHC 2877.

7 At [13].

8      York Trustees Ltd v Body Corporate 166208, above n 5.

9      Erwood v Maxted [2010] NZCA 93, (2010) 20 PRNZ 466 at [18].

10     Haines v Memelink [2019] NZHC 2169.

11     Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757.

undischarged bankrupt) in proceedings which were part of a personal vendetta against the brother-in-law and his former lawyer and business partner.

[18]            Despite the concerns raised by the respondent (i.e. Mr Cheah will liquidate the applicant and commence trading as “Target” under the new company, Target Commercial Painters Ltd), I am not persuaded that this is an appropriate case to make a non-party costs award. I acknowledge that a presumption of insolvency has now arisen, but the applicant has a very longstanding business that has been in operation over 18 years.

Result

[19]            I order that the applicant is to pay costs (and disbursements) to the respondent on a 2B basis with a 25 per cent uplift. No allowance is made for item 29, 0.2 days for sealing an order (that is a matter the applicant is to attend to).

Associate Judge P J Andrew