Thompson v Bassett

[2023] NZHC 3390

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-502

[2023] NZHC 3390

IN THE MATTER

of an agreement for sale and purchase of real estate

BETWEEN

CRAIG DENNIS THOMPSON

Plaintiff

AND

TERESSA JANE BASSETT and DARYN JAMES BASSETT

Defendants

Hearing:

On the papers

Counsel:

J I Taylor for Plaintiff

D M Jackson for Defendants

Judgment:

28 November 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 28 November 2023 at 10.15 am pursuant to rule 11.5 of the High Court Rules

THOMPSON v BASSETT [2023] NZHC 3390 [28 November 2023]

[1]    The plaintiff (Mr Thompson) issued summary judgment proceedings against the defendants (the Bassetts) seeking specific performance of an agreement for sale and purchase. The summary judgment application was due to come before the court on 26 October 2023, by which time the transaction had settled. Whilst reserving rights against each other to pursue various claims in another forum, the only issue left to be determined in this court was in relation to costs.

[2]    Timetable directions were made for the filing of submissions on costs and those have been received. Mr Thompson is seeking indemnity costs or, in descending order, increased costs or 2B scale costs. The Bassetts’ position is that costs ought to lie where they fall, but if costs are to be awarded they should be reasonable scale 2B costs.

Background

[3]    The parties filed affidavits in the summary judgment proceeding and counsel’s memoranda address the facts in some detail. Mr Thompson also filed a large bundle of documents. It is not necessary for me to recount the facts in full, but some context is required.

[4]    By  an  agreement  for  sale   and   purchase   dated   18 September   2021,  Mr Thompson agreed to purchase from the Bassetts a lot in the four-lot subdivision at Loburn Terrace Road.

[5]    Mr Thompson’s solicitors, Wynn Williams, confirmed the conditions of the agreement on 5 November 2021.

[6]    Mr Thompson went  into  possession  of  the  property  from  around February 2022, but settlement could not occur until titles were available. Titles were issued on or about 7 June 2023, and accordingly the settlement date under the agreement was on or around 21 June 2023.

[7]    The Bassetts say they were ready to settle on 21 June 2023. However, at that time Mr Thompson brought a compensation claim against them, and they in turn disputed the claim and gave notice of their intention to pursue various counterclaims

against Mr Thompson. A barrister was appointed to adjudicate, but Mr Thompson elected to withdraw his claim on 28 July 2023.

[8]    On 1 August 2023, Wynn Williams served a settlement notice requiring the Bassetts to settle by 17 August 2023. There were a number of issues that were of concern to the Bassetts and raised by their lawyers, Maciaszek Brown, in a letter of 9 August 2023, which proposed the parties engage in discussion or mediation to resolve matters. Having received no response to that letter, Maciaszek Brown wrote again on 18 August 2023 to Wynn Williams.

[9]    In response, on 18 August 2023, Wynn Williams advised that none of the matters raised prevented settlement from occurring, and all could be dealt with once the transaction was settled. They asserted that the Bassetts were contractually obliged to settle, default interest was accruing, and summary judgment proceedings seeking specific performance were being prepared, with service of them expected the following week.

[10]   On 25 August 2023, Maciaszek Brown sent Wynn Williams a draft settlement statement recording payment of outstanding rental, proposed apportionments of rates and several payments the Bassetts required to be made by Mr Thompson upon settlement. The settlement statement was also expressed to be subject to certain conditions, notably compliance with notices to fix issued by the Waimakariri District Council in respect of a dwelling constructed by Mr Thompson on the land and resolution of other issues concerning the condition of the land. There was no response to that settlement notice.

[11]   On 6 September 2023, Maciaszek Brown emailed Wynn Williams, advising that further steps had been undertaken to consider and address issues of concern to the Bassetts and that they “could probably now proceed to settlement. Correspondence will follow shortly in that regard.” In response to the advice Wynn William had given that summary judgment proceedings had been prepared, Maciaszek Brown said, “… clearly there is no need to file now”.

[12]   Wynn Williams responded on 7 September 2023, again asserting there had been no basis upon which the Bassetts could refuse to settle, the Bassetts were in breach in refusing to settle, and that in  maintaining  that position they had caused  Mr Thompson to incur legal costs in the preparation of proceedings. In relation to those costs, Wynn Williams said: “This is an issue that will need to be addressed, together with the penalty interest that has been accruing”.

[13]   On 12 September 2023, Wynn Williams wrote to Maciaszek Brown, confirming that Mr Thompson was ready to settle and requesting the issue of a settlement statement as at 13 September 2023.

[14]   Subsequently, on 13 September 2023, Maciaszek Brown issued a settlement statement. The settlement statement required payment by Mr Thompson of various amounts relating to issues of dispute that had arisen between the parties but contained no explanation as to the basis upon which settlement was required on those terms.

[15]   Mr Thompson considered the Bassetts were not entitled to require settlement on that basis, and he filed his summary judgment proceeding on 15 September 2023.

[16]   On 12 October 2023, the Bassetts’ counsel wrote to Wynn Williams, including an amended settlement statement for settlement on 13 October 2023, and gave notice that claims for interest and costs were denied and would be litigated if they could not be agreed.

[17]   The following day the Bassetts confirmed the proposed settlement sum was the purchase price provided in the agreement and that they were ready, willing and able to settle. Following the provision of a final settlement statement on 18 October 2023, settlement occurred on 19 October 2023.

Costs principles

[18]   All matters of costs are discretionary,1 but the discretion must be exercised on a principled basis and having regard to the relevant provisions of the High Court Rules 2016.

[19]   The determination of costs, so far as possible, should be both predictable and expeditious.2

[20]   The party that has lost should pay the costs of the party that has won unless there are exceptional reasons to the contrary.3

[21]   In determining success in circumstances where a proceeding has been resolved prior to a hearing, the Court noted in Edmonds v Edmonds:4

(a)The court has the power to make a costs order when the substantive proceedings have been resolved without trial, but the parties have not agreed on costs. There is no tradition of “no order as to costs” merely because a dispute has been settled, except as to costs. That said, if it is not possible for the Judge to say what the likely outcome would have been, that in itself is a possible order.

(b)The overriding objective is to do justice between the parties without incurring unnecessary court time and consequent additional costs.

(c)At each end of the spectrum will be cases where the merits and the likely successful party will be obvious. In between, to differing degrees, there will be cases that are less clear. How far the court will be prepared to inquire into the unresolved substantive issues will depend on the circumstances of the case.

(d)In the absence of a good reason to make any other order, the fall-back position is to make no order as to costs.

[22]   The amount of an award of costs is usually determined by an appropriate daily recovery rate applied to the time considered reasonable for each step reasonably required in relation to a proceeding or interlocutory application. The applicable daily recovery rate depends upon the nature of the proceeding. Time allocations for steps

1      High Court Rules 2016, r 14.1(1).

2      Rule 14.2(1)(g).

3      Rule 14.2(1)(a); and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

4      Edmonds v Edmonds [2023] NZHC 1680 at [21].

in any proceeding or interlocutory application are set out in sch 3 of the High Court Rules.

[23]   The Court may make an order for increased or indemnity costs in the circumstances set out in r 14.6, which relevantly provides:

14.6     Increased costs and indemnity costs

…

(3)The court may order a party to pay increased costs if—

…

(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

…

(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or

(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

…

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

(4)The court may order a party to pay indemnity costs if—

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

…

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[24]   Insofar as there is a claim for increased or indemnity costs, in Minister of Education v James Hardie New Zealand, Fitzgerald J said:5

5      Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [7], cited in Spring v Browne [2023] NZHC 2581.

… It is, in my view, becoming increasingly common for successful parties in commercial litigation … to seek increased and/or indemnity costs. That is often on the basis the party has been successful, but without detailed or significant analysis of why the other party’s conduct appropriately falls within those relatively limited circumstances in which increased and indemnity costs are appropriate. …

[25]   That observation indicates the importance of a party seeking increased costs to set out clearly the basis for doing so and establishing any increase is appropriate.

Mr Thompson’s submissions

[26]   Mr Thompson submits that he is entitled to costs as the successful party because he brought the proceeding to have the Bassetts settle the agreement and ultimately that was the outcome of the case. He says it was necessary to bring the proceeding because the Bassetts had previously refused to settle on the terms of the agreement.

[27]   Mr Thompson says he is entitled to indemnity or increased costs for the period 14 September to 24 October 2023 on the basis the Bassetts acted unnecessarily or vexatiously in their conduct prior to and in defending the proceeding. He says they had no justification for refusing to settle and have forced him to incur significant costs as a result.

Submissions for the Bassetts

[28]   The Bassetts submit complaints about their conduct prior to the commencement of proceeding are irrelevant in a costs context.

[29]   The Bassetts argue the proceeding was premature and unnecessary. They say they never disputed their obligation to settle, and settlement was only delayed because Mr Thompson made the compensation claim which he ultimately withdrew.

[30]   They rely upon the failure of Mr Thompson’s solicitors to respond to some correspondence and draft settlement statements issued by their solicitors. They say it is clear from the August correspondence that they needed to hear from Mr Thompson on access and the notice to fix issues before settlement could occur, but Mr Thompson refused to engage.

[31]   They also submit the issue of the proceedings served no utility other than as a vehicle for Mr Thompson to claim his legal costs. This is because it appears the proceedings were already prepared by the end of August 2023, and when the Bassetts’ 13 September settlement statement was issued, rather than write back to the defendants’ solicitors challenging it, Mr Thompson simply issued the proceedings. The Bassetts submit that was a disproportionate response.

[32]   I was referred to an email of 15 September 2023 from Mr Thompson’s solicitors to the Bassetts’ solicitors (that is the day Mr Thompson commenced this proceeding) which read:

Your clients continue to refuse to settle the sale of the property at Lot 1, 149 Loburn Terrace Road on the terms of the Sale and Purchase Agreement. There is no provision in the agreement that provides a basis for your clients to require the payment of the various costs set out in the settlement statement, in addition to the purchase price, prior to settlement. By failing to complete settlement, your clients are in breach of the agreement.

[33]   The Bassetts submit that had Mr Thompson’s solicitors sent such an email to their solicitors prior to the issue of proceedings, they may have been avoided all together.

[34]   The Bassetts say once the proceeding was issued they acted reasonably and did not defend it per se because settlement was never in issue between the parties. Rather, their notice of opposition challenged only the claim for penalty interest, which is one of the issues that was reserved between the parties.

[35]   I was referred to Derecourt v Smith, where Heath J declined to order specific performance of an agreement for the sale and purchase of land, by way of summary judgment, because the parties had agreed to settle the purchase and there was a lack of evidence from the purchaser to enable calculation of the amounts due.6 It was submitted that while the issue is now moot between these parties, the Court might have exercised its equitable jurisdiction to forgive the Bassetts’ refusal to settle while rental arrears remained due and not reward Mr Thompson with contractual default interest given his failure to honour a collateral contract to pay rent and storage fees.

6      Derecourt v Smith (2002) 4 NZ ConvC 193,577.

[36]   The Bassetts also argue that, if Mr Thompson is to be awarded costs, the scale costs claimed are excessive. They challenge Mr Thompson’s claim for “costs upon costs” and say Mr Thompson acted unreasonably in demanding indemnity costs, and if costs had been sought according to scale then there may not have been an issue in relation to them. They also challenge Mr Thompson’s claim for an allowance for a memorandum prepared by their counsel to which Mr Thompson’s counsel made only slight amendments.

My analysis

[37]   Despite the detailed and able submissions filed by Mr Jackson in support of the Bassetts’ primary position that there should be no costs award, I do not see this as such a case.

[38]   As noted earlier, the party that has lost should pay the costs of the party that has won unless  there  are  exceptional  reasons  to  the  contrary.  I  consider  that  Mr Thompson was successful in this proceeding in that he achieved the primary object for which the proceeding was issued, namely to have the Bassetts settle under the agreement.

[39]   While the Bassetts  say  they  could  and  would  have  settled  earlier  had  Mr Thompson not raised and then withdrawn his compensation claim, I consider that does not alter the position. The fact of the matter is they did not then settle or indicate a willingness to settle in accordance with the agreement.

[40]   By 18 August 2023, Mr Thompson’s solicitors had made it quite clear that Mr Thompson would not settle otherwise than in accordance with the agreement, and if settlement did not occur then summary judgment proceedings would be issued.

[41]   On 12 September 2023, Wynn Williams called upon the Bassetts’ solicitors to issue a settlement statement. The settlement statement that was issued on 13 September 2023 made claims for sums that were included in the Bassetts’ earlier settlement statement of 25 August 2023, which it had been made clear Mr Thompson would not accept.

[42]   It is not surprising in those circumstances, given the difficult history between these parties, that Mr Thompson issued proceedings. While the Bassetts might now regard the taking of that step as premature and unnecessary, I consider Mr Thompson was entitled to take the view that the issuing of proceedings was necessary.

[43]   I do not think I can take a great deal from Derecourt v Smith and the submission that the Bassetts might have been able to successfully oppose summary judgment.7 Not only was that position not tested, but it is contrary to the Bassetts’ own case that their intention and willingness to settle was not in issue.

[44]   However, I do accept the Bassetts’ contention that, once proceedings were issued, they acted reasonably and there is no basis upon which the Court could award indemnity or increased costs. I agree with the submission that conduct of parties prior to the issue of proceedings will generally not be relevant to costs insofar as it is not misconduct in defending the proceeding or a step in the proceeding.8 I consider Mr Thompson is entitled to scale costs.

[45]   As to the quantum of costs, this is a category 2 proceeding being a proceeding of average complexity in the High Court.9 Mr Thompson’s counsel has provided a schedule of costs claimed on a 2B basis. I accept that calculation, except in respect to the following:

(a)Step 11 for filing of a memorandum: I award costs on category A basis as the memorandum in issue was prepared by the Bassetts’ counsel and only subject to review by Mr Thompson’s lawyers.

(b)Step 40 for preparation of written submissions on costs: I award costs on a category A basis. While I accept there is no prohibition on awarding costs on costs, the issue in this case was straightforward and an award on a category A basis is reasonable for this step.

7      Derecourt v Smith, above n 6.

8      Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [207] 3 NZLR 169 at [40]– [41].

9      Rule 14.3.

(c)Step 41 for preparing a bundle of documents in relation to costs: this step was unnecessary and no award is made.

Result

[46]   Mr Thompson is awarded costs in the proceeding of $10,277 plus disbursements of $1,173.91.

O G Paulsen Associate Judge

Solicitors:

Wynn Williams, Christchurch

Maciaszek Brown Law, Christchurch Copy to:

D M Jackson