The Three Sisters Vineyard Limited v Storey

[2014] NZHC 1507

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2014-409-000122 [2014] NZHC 1507

BETWEEN

THE THREE SISTERS VINEYARD

LIMITED Plaintiff

AND

CARL DAVID STOREY, JEANETTE HELEN JOY STOREY and STEPHEN DAID HOBDAY AS TRUSTEES OF THE STOREY FAMILY TRUST Defendants

Hearing:	(On Papers)
Judgment:	2 July 2014

COSTS JUDGMENT OF WHATA J

[1]      This is a judgment as to costs.  In my decision of 14 March 2014 I made the following orders in terms of the first cause of action, namely:1

(a)       The sale and purchase agreement and lease are cancelled;

(b)      The defendants must vacate the property and surrender the property to the plaintiff; and

(c)       An order restraining the defendants from harvesting, selling or in any way dealing with the grapes on the property.

[2]       The plaintiff was successful and ordinarily costs would follow the event. However the parties agreed  that  costs  should  be reserved.    Mr Elliott  has  also indicated that the defendants seek that costs be reserved pending the outcome of substantive proceedings including a claim for potential loss on the resale of the property.  Mr Elliott notes that any such claim would need to take into account the deposit paid by the plaintiff and any improvements to the property which exceeded

the obligations under the lease.

1      The Three Sisters Vineyard Limited v Trustees of the Storey Family Trust [2014] NZHC 471 at

[36].

THE THREE SISTERS VINEYARD LIMITED v TRUSTEES OF THE STOREY FAMILY TRUST [2014] NZHC 1507 [2 July 2014]

[3]       Indemnity costs are now sought by the plaintiff in relation to the application for summary judgment and in relation to the defendants’ application for relief from forfeiture.    The  plaintiff  identifies  case  law  dealing  with  applications  for  relief against forfeiture wherein solicitor/client costs were granted.2    This authority is not disputed by the defendants.

[4]      Reference is also made to cl 13.3 of the lease which provides, in short, that the lessee has to pay the lessor’s costs where it is necessary to enforce any of the lessee’s covenants or any of the lessor’s rights arising from the lease.

Assessment

[5]      I propose to make the following orders:

(a)       Costs on an indemnity basis as sought by the plaintiff; and

(b)My costs order lie in Court pending the resolution of substantive proceedings referred to by the defendants, but with leave granted to the plaintiff to bring this matter back to me in the event of unreasonable delay in the ventilation of the substantive proceedings.

[6]      My reasons are as follows:

(a)      It appears to me that I am bound by the Court of Appeal Authority of Watson & Sons Ltd v Active Manuka Honey Association,3  helpfully cited  by Brewer  J  in  Maydanoz  NZ  Limited v  Popplewell.4     As Brewer J noted, the Court of Appeal in that case said:5

It is clear on principle and on authority that once it is established that the indemnity is applicable in the circumstances and that, properly construed, it includes solicitor-client costs, no discretion remains available other than on public policy grounds or as part of an assessment by

2      Referring McKenna v North Harbour Taverns Limited   [1991] BCL 1669 (HC); and Harlow

Finance and Leasing Ltd v Sterling Nominees Ltd HC Auckland M1262/00, 17 August 2000.

3      Watson & Sons Ltd v Active Manuka Honey Association [2009] NZCA 595 at [35].

4      Maydanoz NZ Ltd v Popplewell [2012] NZHC 2223.

5      Watson & Sons Ltd v Active Manuka Honey Association, above n 3, at [35].

the Court as to whether the amount of solicitor-client costs is objectively reasonable: …

(b)In this case, the lease specifies that “all costs” “in connection with breach” and “to enforce” the “lessee’s covenants” must be paid by the lessee:

13.3     Lessee to pay lessor’s costs

In addition to the rental and other monies reserved by this lease the lessee shall pay:

(a) (b)	... all costs, charges and expenses for which the lessor
shall   become   liable   in   consequence   of,   or   in connection with, any breach or default by the lessee in the performance of any covenants in this lease;
(c)	all  costs,  charges  and  expenses  (including  actual legal costs as between solicitor and client) that may be incurred by the lessor in enforcing or attempting to enforce any of the lessee’s covenants, or any of the lessor’s rights, under or arising out of this lease. (emphasis added).
(c)	I   have   no	reason   to   find   that   the   solicitor   client   costs   are

unreasonable, and the respondent did not content as much.  In short, the steps taken by Three Sisters were reasonable in the circumstances. As I said:

[25]    I commence by observing that Three sisters has demonstrated ample good faith in the way that it has approached the difficulties arising.  This is not a case where Three Sisters has acted pre-emptively.  Rather, it appears to me that Three Sisters has endeavoured as best it could to make arrangements that suit the Trustees.  Mr Elliott did not seek to suggest otherwise.

(d)      I consider, however, that the costs order should lie in court pending the outcome of substantive proceedings so that the full merits are assessed on the respective claims.   In this regard I note that the parties agreed  that  costs  should  be  reserved  and  as  I said  in  my

judgment:6

6      The Three Sisters Vineyard Limited v Trustees of the Storey Family Trust, above n 1, at [29].

... it would be divorced from reality to proceed on the basis that the tenants only did what was necessary to maintain the property - they were also aspirant purchasers of the property seeking to forge a new life as vintners.  Furthermore, Three Sisters will, in fact, benefit in a substantial way from the work undertaken by the Trustees.   The evidence that the vineyard needed considerable work to bring it up to standard was not seriously disputed.  I am told from the bar that the next harvest will reap $20,000 in grapes.

[7]      I  consider,  therefore,  that  the  just  outcome  is  to  make  an  award  on  an indemnity basis, in accordance with guiding authority, but also that the order should be held in Court pending consideration of the full merits of the respective claims of the parties.   An enforceable order now, given the already difficult financial circumstances of the former lessees, could have an unduly punitive effect on them against a backdrop where they worked hard to make the leasehold viable.  Plainly matters cannot be allowed to drag on, so leave is granted to Three Sisters to seek reconsideration of the position in the event there is unreasonable delay in the ventilation of the substantive proceedings.

[8]      Orders in terms of [5] above accordingly.

Solicitors:

Alan Jones Law, Auckland

Ashley Law Limited, Rangiora