Taupo Residential Limited v Kerr
[2018] NZHC 2334
•6 September 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001112
[2018] NZHC 2334
BETWEEN TAUPO RESIDENTIAL LIMITED
Judgment Creditor
AND
RUTHVEN SCOTT BLAIR KERR
Judgment Debtor
On the papers: 10 August 2018 Appearances:
T R Mounsey for the Judgment Creditor M D Branch for the Judgment Debtor
Judgment:
6 September 2018
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 6 September 2018 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Harkness Henry, Hamilton Malcolm Mounsey Clarke, Taupo
TAUPO RESIDENTIAL LTD v KERR [2018] NZHC 2334 [6 September 2018]
[1] On 29 November 2016, the District Court at Taupo issued a costs judgment against Mr Kerr and his co-plaintiff in the proceeding filed under CIV-2014-069-026, ordering them to pay the first defendant, Taupo Residential Limited, $56,289.24 for costs and disbursements pursuant to High Court Rule 14.11.1 This was based on the plaintiffs’ allegedly unreasonable refusal to accept a Calderbank costs offer (which was subject to conditions) in circumstances where the plaintiffs were successful in the proceeding, but were awarded a sum less than that offered to them.
[2] On 6 June 2017, this Court issued a bankruptcy notice for the unpaid judgment debt against Mr Kerr (the judgment debtor in this proceeding) at the request of Taupo Residential, and on 21 August 2017 Mr Kerr was served with the notice. He took no formal steps in response to the notice and on 30 November 2017 Taupo Residential filed an application for his adjudication.
[3] The application was initially listed before the Court on 8 February 2018. It was adjourned on several occasions, without the need for appearances. The adjournments were made at the request of the Taupo Residential (initially without opposition and then with the agreement of Mr Kerr). This was on the basis that the costs judgment was the subject of an appeal (in which Mr Kerr and his co-plaintiff were appellants); and on 5 December 2017 I made an order by consent to stay the execution of the costs judgment when making timetable directions in the appeal proceeding through to a defended hearing. The hearing was subsequently allocated for 14 March 2018.2 The consent to a stay was appropriate as the basis for the appeal was plainly arguable. The stay was to continue pending the outcome of the appeal or further order.
Discontinuance
[4] On 2 July 2018 Woodhouse J allowed the appeal after a defended hearing and set aside the District Court’s costs judgment.3 On 9 July 2018 Taupo Residential filed
1 Lough v Taupo Residential Ltd [2016] NZDC 23352.
2 The appeal was filed on 22 December 2016 in the Rotorua Registry under CIV-2016-463-87 (amended grounds of appeal were filed on 22 December 2016).
3 Lough v Taupo Residential Ltd [2018] NZHC 1603.
a notice to discontinue this bankruptcy proceeding, acknowledging that it had no option but to discontinue, there no longer being any basis for an order for Mr Kerr’s adjudication.
The remaining issues – costs
[5] The only remaining issue in this proceeding is as to costs. Both sides seek costs. The arguments for Taupo Residential range across several matters, including that there was no stay of execution of the costs judgment for some considerable time after the appeal was filed. Further, the stay was not ordered until well after the bankruptcy notice was served, had gone unanswered and the inevitable act of bankruptcy occurred. In fact, it was not until several months after the application for adjudication was filed that a stay order was made. Counsel submits that in the absence of a stay, Taupo Residential acted wholly reasonably in taking steps in this bankruptcy proceeding to enforce the costs judgment and that it ought to be compensated for the cost it was put to. Counsel also submits that there was delay in prosecuting the appeal and that this should be treated as a matter weighing in its favour when it comes to costs in this proceeding.
[6] Counsel for Mr Kerr responds that given the ultimate outcome, Mr Kerr was the successful party and as such is entitled to costs pursuant to the normal presumption under the statutory costs regime unless there are sufficient reasons to displace the presumption. He submits this is not the case, the fact of the matter being that Taupo Residential was aware of the appeal from its commencement and had been asked on several occasions to consent to a stay pending the outcome of the appeal. In the circumstances, it was an abuse of process to commence and pursue proceedings for Mr Kerr’s adjudication. He drew attention to the conduct of opposing parties (including Taupo Residential) in the appeal, including claimed undue pressure to settle the appeal, and to the fact that Taupo Residential was fully aware that a stay was being provided for in that proceeding, all of which (he submitted) makes an order for costs in favour of Mr Kerr particularly appropriate.
[7] Counsel for Taupo Residential in turn pointed to dilatory conduct by the appellants in prosecuting the appeal and in seeking a formal stay; he disagreed that there was any inappropriate pressure to settle.
The costs that each side seeks
[8] Taupo Residential seeks an order that Mr Kerr pay 2B costs and disbursements totalling $2,627.75. The steps for which it seeks costs are those set out in items 44 and 45 of Schedule 3 of the High Court Rules (filing and serving bankruptcy notice, at 0.2 of a day ($446), and filing application for adjudication by creditor, at 0.6 of a day ($1,338)). The disbursements he seeks are standard disbursements for a filing fee on the bankruptcy notice, service fee and filing fee on application for adjudication.
[9] Mr Kerr claims 2B costs of $892 for the appearance on 5 December 2017 in the appeal proceeding when the stay was ordered. The claim can be dealt with in short order. It is declined, for the simple reason that the appearance was not a step made in this proceeding – it was made in the appeal proceeding.
[10] I turn then to the judgment creditor’s application for costs, which is also declined but for other reasons.
Costs – the relevant principles
[11] As Justice Woodhouse observed in his decision on the appeal, all matters relating to costs are at the discretion of the Court. But the discretion is to be exercised in a principled way and by reference to the principles in rr 14.2 to rr 14.10 of the High Court Rules 2016. In terms of the principles in r 14.2, the general presumption is that costs should follow the event.4
[12] The principles underpinning the cost regime have been discussed on numerous occasions. It is sufficient to repeat what Woodhouse J said about the way the
4 High Court Rules 2016, r 14.2(a).
discretion is intended to operate. Though said in the context of costs on appeal what he said is of general application:5
[19]Rule 14.1(2), prescribing the discretionary jurisdiction, states that rr
14.2 to 14.10 are subject to the discretion. But that also is qualified. The new costs regime was introduced in 2000. In a decision in 2002 the Court of Appeal said that it resulted in “a strong implication that a Court is to apply the regime in the absence of some reason to the contrary”.[12] This statement was approved by the Supreme Court in Manukau Golf Club Inc v Shoye Venture Ltd. [13]
[20] The rules and principles of most relevance on this appeal are as follows:
(a) The primary rule is that “the party who fails with respect to a proceeding … should pay costs to the party who succeeds”; [14] that is, costs follow the event. The primacy of this rule has been emphasised in the Supreme Court and Court of Appeal in different ways: “the loser, and only the loser, pays”; [15] “[a] fundamental principle applying to the determination of costs in all the general courts in New Zealand is that costs follow the event”;[16] “the paramount rule that costs should follow the event”. [17]
(b) The leading cases emphasise the general need to determine who succeeded and who lost in a straightforward way based on the formal result. The Court of Appeal of England and Wales, dealing with a money claim, said: “In deciding who is the successful party, the most important thing is to identify the party who is to pay money to the other. That is the surest indication of success and failure.”[18] When the claim is not for money, or when there is an unsuccessful counterclaim, the same principle applies; the party who fails is the party against whom judgment is entered.
(c) The fundamental rule that costs follow the event is not absolute, but it should not be departed from “unless there are exceptional reasons”. [19]
(d) “So far as possible the determination of costs should be predictable and expeditious.”[20]
[13]His Honour added:
[28] This review of some of the matters in issue between the parties, beyond the question as to how much remediation would cost, support the conclusion, based on principle, that the successful party was the plaintiffs. This brief discussion also illustrates the general importance of adhering to the principles that costs follow the event unless there are exceptional reasons, and that, so far as possible, the determination of costs should be predictable and expeditious.
5 Lough v Taupo Residential Ltd [2018] NZHC 1603.
[14] I respectfully adopt the same approach in this bankruptcy proceeding. Plainly, Mr Kerr is to be treated as the successful party on the discontinued proceeding. That must be the starting point when dealing with costs.
[15] Rule 15.23 provides that unless the Court orders otherwise, a plaintiff that discontinues a proceeding must pay costs of and incidental to the proceeding up to and including the discontinuance. The Court of Appeal has observed that the normal presumption applies on a discontinuance – it being important to the statutory costs regime and its predictability that costs as a remedy be restricted to its proper role of partially compensating the party “winning” a proceeding for its legal costs in respect of that proceeding.6 In other words, in the general run of cases when a plaintiff abandons a proceeding this is treated as a “win” for the defendant.
[16] The normal presumption may be displaced where it is just and equitable that the Court exercise its discretion to make an order in favour of the party discontinuing. In terms of the Supreme Court’s decision in Shirley v Wairarapa District Health Board exceptional circumstances are required.7
[17] It has also been said that the presumption of costs on a discontinuance is not necessarily displaced merely because the plaintiff acted reasonably in bringing and discontinuing the proceeding, though these are relevant factors.8
[18] The plaintiff has the onus. Looking at the facts of the present case, I accept it was reasonable for Taupo Residential to issue a bankruptcy notice and to file an application for adjudication when those steps were taken. There was no stay on the enforcement of the District Court’s costs judgment (which was issued on 29 November 2016) until December 2017. But that does not mean that the judgment creditor ought to be treated as the “winner” in this proceeding and therefore entitled to have costs on the discontinuance.
6 Thames-Coromandel District Council v Heritage Protection Society Incorporated and Anor
[2009] NZCA 204.
7 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523.
8 Vector Gas Ltd v Todd Petroleum Mining Company Ltd HC Wellington CIV-2004-485-1753, 7 December 2010 at [18].
[19] It was inevitable that the bankruptcy application would be adjourned pending the outcome of the appeal – the case on appeal being clearly arguable – unless of course the debtor was dilatory in prosecuting its appeal to the extent that the delay could not be tolerated as a reason for delaying the bankruptcy proceeding. But the delays were dealt within the appeal proceeding, and both counsel in fact accepted the appropriateness of adjourning the bankruptcy proceeding and ultimately agreeing to a stay pending the outcome of the appeal. Therefore, though I accept that Taupo Residential acted reasonably in bringing the application for adjudication, I am not satisfied it has demonstrated sufficient or exceptional grounds for displacing the normal presumption as to costs in this proceeding. The fact of the matter is that Taupo Residential took a risk when proceeding with its bankruptcy proceeding. The risk was that Mr Kerr’s appeal would succeed. The appeal did succeed, and Taupo Residential cannot to be compensated for its costs in this proceeding. Mr Kerr, on the other hand, does not claim for costs for any steps taken in this proceeding (he claims for a step taken in the appeal proceeding).
Result
[20] The result is that there will be no order for costs in favour of either side. Costs will lie where they fall.
Associate Judge Sargisson
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