The Whitehouse Tavern Trust Board v Department of Internal Affairs

[2013] NZHC 2321

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2012-485-2589 [2013] NZHC 2321

UNDER THE  Declaratory Judgments Act 1908

IN THE MATTER OF       an application for a declaratory judgment under the Gambling Act 2003 and the Gambling (Class 4 Net Proceeds) Regulations 2004

BETWEEN  THE WHITEHOUSE TAVERN TRUST BOARD

Plaintiff

ANDTHE DEPARTMENT OF INTERNAL AFFAIRS

Defendant

On the papers

Counsel:                  D M O'Neill for the Plaintiff

K Muller/A Sintenie for the Defendant

Judgment:                6 September 2013

JUDGMENT OF MALLON J

Introduction

[1]      The Whitehouse Tavern Trust Board (the Trust) seeks costs in respect of proceedings it commenced against the Department of Internal Affairs (the DIA). The DIA  opposes  the  costs  application  and  seeks  costs  in  respect  of  the  Trust’s application for costs.

Background

[2]      The proceedings related to a report released by the DIA alleging breaches of the Gambling Act 2003 (the Act) by the Trust.  The report was dated 30 August 2012

THE WHITEHOUSE TAVERN TRUST BOARD v THE DEPARTMENT OF INTERNAL AFFAIRS [2013] NZHC 2321 [6 September 2013]

and followed the DIA’s audit of the Trust for the period 1 October 2010 to 30

September  2011.    The  30 August  2012  report  contained  a  request  for  specific information and action in respect of matters covered by the report.  On 20 September

2012 the trustees of the Trust responded to the DIA by letter.

[3]      Having not heard further from the DIA, on 30 November 2012 the Trust commenced proceedings against the DIA, seeking the following declarations:

(a)      a declaration that the grants it made to the New Zealand Historic Aircraft Trust and the New Zealand Warbirds Association Inc were for authorised purposes under the Act;

(b)a  declaration  that  the  travel  costs  and  expenses  paid  to  a  venue operator to travel to a gaming expo in Sydney were from non-gaming funds;

(c)     a declaration that the Board is not holding excessive levels of undistributed net proceeds;

(d)      a declaration that the report issued by the DIA was in error.

[4]      On 30 January 2013 the DIA filed a statement of defence.  On 28 February

2013 counsel for the DIA contacted counsel for the Trust advising him that the DIA was going to release a “final” audit report replacing the “initial” audit report.  The letter stated “[g]iven the Audit Report, subject of the proceedings, no longer concludes that your client is non-compliant please let me have your client’s response on whether this is an acceptable resolution to this proceeding”.  In accordance with that letter, the subsequent audit report dated 28 February 2013 stated that:

(a)      the grants made to the New Zealand Historic Aircraft Trust and the New Zealand Warbirds Association Inc complied with the Act and were covered by the authorised purpose of the Trust;

(b)the travel costs and expenses paid to a venue operator to attend the gaming expo was paid out of non-gaming funds;

(c)      the finding that the Trust held excessive levels of undistributed net proceeds was on hold awaiting a High Court decision on the issue of undistributed net proceeds taken by another operator.

[5]      There  was  correspondence  between  the  parties  regarding  costs.     No agreement was reached.  The Trust has now filed a notice of discontinuance and the only outstanding matter is the Trust’s application for costs.

General principles

[6]      Unless  the  court  otherwise  orders  or  the  defendant  otherwise  agrees,  a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant   of   and   incidental   to   the   proceeding   up   to   and   including   the discontinuance.[1]    In considering whether to order otherwise, the considerations that arise in this case are whether it was reasonable for the Trust to bring the proceeding and the reason the Trust has discontinued.

[1] High Court Rules, r 15.23.

Assessment of costs

[7]      The   DIA  says   that   the   Trust’s   commencement   of   proceedings   was “unheralded and premature” and was not reasonable.  It says that the audit process is an iterative one which usually involves several meetings and the tabling of draft audit reports for discussion.  It says that this was hampered by the Trust’s resistance to engaging with the DIA.  It says that, because of this, the 30 August 2012 report was a way of raising issues with the Trust.  It says that if the Trust had forewarned the DIA that the Trust intended to file proceedings in relation to the audit report, the DIA would have been able to allay the Trust’s concerns by confirming that a review of the “draft” audit report was still underway.

[8]      The Trust, on the other hand, says that there was no indication that the 30

August 2012 audit report was only a draft report.  It says that its view is supported by the report itself and accompanying letter which said that the report had been “finalised”, sought  confirmation of non-compliance from the Trust, required the

Trust to take immediate steps to rectify matters and said that consideration would be

given to what sanction would be imposed.  The Trust also says that the statement of defence filed by the DIA on 30 January 2013 did not allude to a further audit report being prepared.

[9]      In my view the Trust has not shown that it should have costs in respect of the proceeding that is now discontinued.  I accept that it was not clear to the Trust that the 30 August 2012 report was a draft report.   The Trust was asked to provide a response to the breaches identified, to advise what action to take to rectify those breaches,  and  to  provide  further  information.     I  also  accept  that  the  Trust discontinued the proceeding because the DIA released a final report addressing all but one of the Trust’s  concerns and  therefore the proceeding was  successful  in achieving what it set out to do.

[10]     However  the  proceeding  was  issued  before  the  DIA  had  provided  any response to the Trust’s letter of 20 September 2012, and without any warning that the proceeding would be issued in the absence of a response.  Had an inquiry been made before the proceeding was filed it seems very likely that the Trust would have been told that the DIA was still considering the information and had not yet formed a view on  whether  that  information  altered  matters  from  its  perspective.     Once  the proceeding was filed, the DIA responded quickly (bearing in mind the Christmas break) and responsibly in bringing matters to a conclusion.

[11]     In those circumstances I consider that costs should lie where they fall.  That includes in relation to the costs application.  Although I have not awarded costs to the Trust, it was not entirely unreasonable for the Trust to consider it was entitled to costs.  Generally claims for costs in relation to costs applications are not ordered and

I see no sufficient reason to do so in this case.[2]

[2] Harley v Registrar-General of Land HC Wellington CIV-2009-485-2167, 23 September 2010 at [6]; Bloor v IAG New Zealand Ltd HC Rotorua CIV-2004-463-425, 3 February 2011 at [29]; New Zealand Sports Merchandising Ltd v DSL Logistics Ltd HC Auckland CIV-2009-404-5548,

19 August 2010 at [22]-[26].

Result

[12]     Costs are to lie where they fall.

Mallon J