Williams v Waimate District Council
[2013] NZHC 2922
•6 November 2013
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
CRI-2013-476-000004 [2013] NZHC 2922
IN THE MATTER OF an application for costs under the Costs in
Criminal Cases Act 1967
BETWEEN WILLIAM KEITH WILLIAMS First Appellant
GLENKEITH INDUSTRIES (NZ) LIMITED
Second Appellant
ANDWAIMATE DISTRICT COUNCIL Respondent
Hearing: 2-3 October 2013 (Heard at Christchurch)
Counsel: F M Farr and A R Shaw for appellants
S F Quinn for respondent
Judgment: 6 November 2013
RESERVED JUDGMENT OF DOBSON J
Contents
Background........................................................................................................................................ [4] The substantive determination....................................................................................................... [35] Costs application ............................................................................................................................. [37] The appeal........................................................................................................................................ [43] Refusal of leave to cross-examine deponents ................................................................................ [48] Factual findings warranted indemnity costs, and such findings meant WDC acted in
bad faith ........................................................................................................................................... [52] Should the appellants have been found “innocent”? .................................................................... [78] Incorrect comparison of the appellants’ and respondent’s costs ................................................. [81] Costs of claiming costs .................................................................................................................... [91] Costs on the appeal.......................................................................................................................... [94] Summary .......................................................................................................................................... [95]
WILLIAMS v WAIMATE DISTRICT COUNCIL [2013] NZHC 2922 [6 November 2013]
[1] This is an appeal from a decision of Judge J Maze in the District Court at Timaru, delivered on 26 June 2013, which allowed in part the appellants’ application for costs under the Costs in Criminal Cases Act 1967 (CCC Act).1 That application followed the dismissal of prosecutions brought against the appellants by the respondent (WDC). The judgment ordered $80,000 costs against WDC, but dismissed the application so far as it sought indemnity costs which at that point were put at some $170,000. The appeal is from the Judge’s decision not to award indemnity costs.
[2] The case provides an abject lesson in the failings of the statutory scheme for regulation of building activities by territorial authorities, and indeed the Court system, in applying any sense of proportion to the extent of resources that might justifiably be expended in such disputes. I was advised by Mr Quinn that the building that is the subject of the unhappy saga has a recent valuation of some
$69,000. Between them, the parties had expended more than $250,000 in pursuit of the present dispute, before the present appeal. Making every allowance for the importance of principle, and that no price can be put on protecting the safety of the public and occupants, the resources committed to the dispute are unjustifiable on any basis. The argument over costs occupied two full days in the District Court, and the appeal before me took a further two full days. Sadly, it is not an option for me to peremptorily declare that the proceeding has absorbed more than its rationed share of resources and is to be treated as at an end.
[3] Given that reality, it is necessary to begin with a review of the relatively protracted background to the case.
Background
[4] The first appellant (Mr Williams) is the alter ego of the second. The second appellant is the owner of the property at 10-12 Innes Street, Waimate. In the relevant period, it has been occupied by Mr Williams for his business of motor repairs and as a garage. Around Christmas 2010, parts of the exterior of the building were
observed to be flexing in strong winds to an extent that caused or contributed to
1 Waimate District Council v Williams DC Timaru CRI-2011-076-001459, 26 June 2013 (costs judgment).
windows falling out. A neighbour observed broken glass being swept up as a result of such damage. On Mr Williams’ version of events, he contacted Mr Donaldson, the manager of planning and regulatory at WDC, to indicate that urgent repairs were required to render the building safe. Mr Williams indicated his wish to proceed with the work without a building permit, and has deposed that Mr Donaldson indicated he should get the work done promptly. Mr Williams recalled Mr Donaldson suggesting that the work be done before Ms Leckey, a building inspector with WDC, returned from leave.
[5] Mr Donaldson has denied on oath that he gave Mr Williams permission in the terms described. Mr Craig Rowley, a councillor with WDC, swore an affidavit in support of the claim for costs. In it, he described questioning Mr Donaldson during a meeting in February 2011 as to Mr Williams’ version of the permission Mr Williams thought he had been given. Mr Rowley deposed that Mr Donaldson confirmed that he had told Mr Williams to do the work in question before Ms Leckey returned.
[6] Relatively extensive work was duly undertaken. Mr Michael Elliot, a builder who assisted Mr Williams with the work, has deposed that he was asked to do work on the building just before the Christmas break in December 2010, when windows had fallen out of the building because of strong winds. Once the building work began, Mr Elliot discovered that the framing on the relevant wall, plus the bottom plate and piles in that area were rotten, and that there was no choice but to replace the footings and frames from the ground to the height of the first floor. Mr Elliot undertook the work, being aware that Mr Williams did not have a building consent, but on the basis that Mr Williams had spoken to people at WDC and they had agreed that he could do the works as a matter of urgency.
[7] Mr Williams’ recollection of his dealings with WDC before the work was undertaken included a discussion with Mr Mark Foster, a building inspector to whom he says he was referred by Mr Donaldson. Mr Williams deposed that Mr Foster did not wish to see the plans he had with him, and that his discussions with WDC directed him to a Department of Building and Housing (DBH) document of which he obtained a copy.
[8] That document was a guide which detailed the scope of s 41 of the Building Act 2004 (the Act). Section 40 of the Act prohibits the carrying out of any building work except in accordance with a building consent. Section 41 recognises exceptions from that prohibition, relevantly where a building consent could not practicably be obtained in advance because the building work has to be carried out urgently for the purpose of saving or protecting life or health or preventing serious damage to property. Section 42 then requires an owner of a building on which work has been done in reliance on s 41 to apply, as soon as practicable after completion of the building work, for a certificate of acceptance under s 96. Such a certificate may be issued by a territorial authority only if it is satisfied to the best of its knowledge and belief that building work carried out without a permit in reliance on s 41 did indeed comply with the Building Code. The essence of this obligation to apply under s 96 was highlighted in the DBH guide that Mr Williams had at the time.
[9] Mr Williams’ understanding was that some of the work needing to be done would also not need a building permit because it was within Schedule 1 to the Act, namely work involving a replacement of like with like on an existing structure.
[10] On 10 January 2011, Ms Leckey wrote to Mr Williams, recording her observation that extensive work had been completed at the premises, seeking clarification on the parameters of work that might be implemented without a consent pursuant to Schedule 1, and urging Mr Williams to cease further work until the issues she raised had been resolved.
[11] Mr Williams responded to WDC the following day, describing the scope of work that had been undertaken, and stating that it had all been done under urgency due to the danger to the public from falling glass. He stated that once the repairs had been completed, he intended to apply to WDC for a certificate of acceptance under s 96 of the Act. He also stated that some of the work was exempt under Schedule 1.
[12] On 19 January 2011, Ms Leckey acknowledged Mr Williams’ letter and invited him to telephone in order to arrange a meeting with her. Later in January, Mr Williams arranged for a structural engineer, Mr Littler, who had some years previously done drawings for part of the work that had recently been undertaken, to
inspect the works. That inspection occurred on 1 February 2011 and Mr Littler advised Mr Williams that the work done was in compliance with the Building Code with the exception of a door that faced the wrong way and would need to be turned around to open outwards in order to meet fire safety standards. Mr Williams appointed Mr Littler to be his agent to apply for a certificate of acceptance and Mr Williams advised Mr Donaldson by telephone of that appointment.
[13] Ms Leckey issued a notice to fix in relation to the building pursuant to ss 164 and 165 of the Act dated 1 February 2011. That notice specified contravention of, or non-compliance with, the Act involving the renovation of “dilapidated two storey commercial building to engineer’s design without building consent ...”. The notice required the owner to cease work and to apply for a certificate of acceptance for the work as it stood. Matters of non-compliance included:
There are petrol tanks located under the forecourt area and possibly under the floor of the structure as the building was originally a garage, Council have no records of the decommissioning of these tanks.
[14] On 2 February 2011, Ms Leckey completed a WDC printed form used to record a complaint received by its building team. She recorded herself as the officer receiving the complaint, with a notation “person wished to remain unknown”. Her notes on the form purport to record a concern raised with her regarding disused petrol tanks located under the building, with a risk of environmental soil contamination. The action taken in response to the complaint was noted as the issuance of a notice to fix on 2 February 2011.
[15] Mr Williams is sceptical that there was any third party complainant. He suggested that the complaint form was completed by Ms Leckey on her own initiative, to justify the inclusion in the notice to fix of reference to concerns over the disused petrol tanks. Whilst the complaint form, completed on 2 February 2011, suggests that the notice to fix was issued as a response to it, the notice to fix is dated a day earlier on 1 February 2011.
[16] Mr Williams was concerned that Ms Leckey had made assumptions and statements about the work that had not been done, that she had intimidated Mr Elliot, that she would not address questions Mr Williams had posed and that she had made
false allegations in relation to his conduct. He raised his concerns at Ms Leckey’s treatment of the issue with Councillor Rowley of WDC, and briefed Mr Rowley on his version of the sequence of events up until that time, in anticipation of a meeting on 10 February 2011. Mr Rowley’s subsequent affidavit stated, in relation to the meeting that occurred in February 2011:
During the meeting Ms Leckey insisted that a prosecution should proceed against the defendants and Ms Leckey refused to consider any other possible way of dealing with the matter and had dismissed any such suggestions. It would be fair to say that Ms Leckey appeared to be obsessed with prosecuting Mr Williams.
[17] Mr Rowley also deposed that, after a number of discussions including Mr Williams’ accusations and concerns about Ms Leckey’s independence, he thought an understanding had been reached, which meant that prosecutions would not proceed.
[18] Subsequent to the dismissal of the informations, a second councillor, and the deputy mayor of WDC, Mr Peter McIlraith also completed an affidavit in support of the appellants’ application for costs. Mr McIlraith describes the 10 February 2011 meeting as having been convened because the Chief Executive, Mr Alden, had advised the WDC that litigation was pending so that the issue should be referred by management to the WDC, for their opinion. Mr McIlraith describes Ms Leckey’s demeanour at the end of the meeting as being “resolute”, recalling that she stood up from the table with her hands on the table saying “if he drives another nail he will be prosecuted”. In the face of more conciliatory attitudes from others at the meeting, Mr McIlraith describes Ms Leckey as being adamant that the notice to fix should not be lifted, that Mr Williams should not finish the building work, and that a prosecution should be instituted. Then and thereafter, Mr McIlraith preferred other initiatives, including mediation or arbitration, to be pursued, and his impression was that the Mayor and Chief Executive agreed with that.
[19] Mr McIlraith further deposed that in early 2012, he was involved in discussions with the Mayor and the Chief Executive about the prospect of standing Ms Leckey aside from matters involving Mr Williams’ building. He stated:
I was involved in discussions with a Wellington barrister during this time, introduced to me by [the Chief Executive] relating to the concerns of the Council management that Ms Leckey had threatened to resign if she was stood aside or if the prosecution was not continued and the possible personal grievance brought against Council for constructive dismissal. It would be fair to say that Council management were more concerned with avoiding a personal grievance than giving appropriate consideration to standing Ms Leckey aside and withdrawing the prosecutions.
[20] Although the point was not specifically addressed in any of the evidence, the agreed position by the time the appeal was argued before me was that Ms Leckey had left the employment of WDC, and that a personal grievance had been the subject of a confidential settlement.
[21] Mr McIlraith’s affidavit also stated that Ms Leckey did not advise the participants at the 10 February 2011 meeting of the issues surrounding s 41, so that it appears the meeting occurred without appreciating that Mr Williams sought to justify at least some of the work on the basis that the urgent need for it exempted it from the requirement for a building consent.
[22] Mr Williams met with the Chief Executive on 9 June 2011 to pursue a request that WDC withdraw the notice to fix. Mr Williams sought to explain that his company considered it was operating within the law, and that it could only apply for a certificate of acceptance under s 96 once the work was completed. To do so, the notice to fix had to be removed.
[23] In apparent response to that contact, Ms Leckey produced an internal memorandum for the Chief Executive and Mr Donaldson the next day, 10 June 2011. The memorandum was headed “Illegal building work”, addressed the requirement under s 40 of the Act for a building consent before building work could occur, and referred to the scope of exemption in Schedule 1 for like for like maintenance work. Although in a chronological review of the dealings between WDC officers and Mr Williams there was passing reference to Mr Williams’ belief that he could implement the work under s 41, there was no acknowledgement of the terms of s 41, or any consideration of its possible application.
[24] Ms Leckey’s chronology referred to email enquiries she had made on
4 February 2011 to two other senior consenting officers (ie employed by other territorial authorities) to see how they would deal with the problem. Her chronology recorded:
Both agreed not exempt under schedule 1 contravenes section 40. Also rang
DBH to discuss.
[25] In a belated round of additional disclosure made only on the second day of the costs argument in the District Court, WDC disclosed a handwritten diary note made by Ms Leckey of what appears to be the telephone discussion with DBH referred to in the 4 February 2011 entry in her chronology. The notes suggest the call was about the scope of Schedule 1, that the initial recipient of her call “... passed me to a technical expert (Mike)”, and then recorded that “some areas may be exempt”. Eventually, WDC disclosed a chain of 4 February 2011 emails from and to Ms Leckey that appear to be those referred to in her chronology. She received an email confirmation of the view she took, namely that the work did not come within Schedule 1, from an email correspondent who appeared to be a consenting officer at the Dunedin City Council. Ms Leckey responded again to that person some two and a half hours after the discussion her file note records with “an expert” at DBH, saying:
... According to the DBH he appears to be doing everything right in accordance with the new schedule 1 and get this he didn’t have to tell us anything he doesn’t want to tell us if he “thinks” it is within schedule 1!!
I am gutted! Are they nutters in Wellington!
[26] On 15 June 2011, the Chief Executive of WDC wrote to Mr Williams, acknowledging that subsequent to Mr Williams’ 9 June visit, he had spoken with Ms Leckey and with Mr Donaldson. The Chief Executive identified a difference in legal interpretation of the provisions of the Act, and recorded that WDC had asked for the legal opinion Mr Williams was relying on but that he had not been prepared to disclose it. The letter repeated the prospect of Mr Williams applying for a certificate of acceptance, which would involve Mr Littler providing requested information and documentation, or seeking a determination from DBH. The letter
advised that no enforcement action would be taken before 29 June 2011 to enable
Mr Williams to consider the options.
[27] There appears to have been a stand-off. From WDC’s position, the work carried out without a permit needed to be regularised as a priority and the action required to do that was for the building owner to apply for a certificate of acceptance. From Mr Williams’ perspective, no doubt wary of Ms Leckey’s motives, he treated that initiative as one that WDC was pressing for so that they could “set him up to fail”. So far as he was concerned, he was only obliged to apply for a certificate of acceptance as soon as practicable after the work had been completed. Although there was very little work still to be done, by that time the notice to fix would make it illegal to do any work at all.
[28] In early July 2011, Ms Leckey requested the senior station officer of the Fire Service stationed in Timaru to inspect the premises to assess whether it constituted a dangerous building for the purposes of s 121 of the Act. That section provides for a territorial authority to seek advice from competent members of the New Zealand Fire Service. The relevant fire officer, Mr Collins, inspected the building on 7 July 2011 and reported to Ms Leckey, with a copy to Mr Williams, on 15 July 2011. He concluded that the building was dangerous, and recommended that the WDC should issue a notice to that effect under s 124.
[29] Ms Leckey duly issued a dangerous building notice in respect of the premises on 16 July 2011. That notice both prohibited persons from approaching the building, and required the owner to address the fire hazard danger that had been identified. The notice required the owner to apply for a building consent for the remedial work required to bring the building into compliance with the Act.
[30] On 27 July 2011, a retired man from Otaio, Mr William Stewart, who appears not to have had any other involvement in this matter, completed an affidavit recording exchanges he had with Ms Leckey on 15 July 2011. On that day, Mr Stewart was having lunch at a tearoom in Waimate when Ms Leckey and her partner came and sat at the table Mr Stewart was at. Mr Stewart happened to remark that he had just dropped a tyre off to Mr Williams, to which Ms Leckey responded
that she would not take anything to Mr Williams as he was not a proper mechanic. After Mr Stewart had stated that he felt Mr Williams was always “pretty good”, Ms Leckey stated that Mr Williams was a liar, and when Mr Stewart disputed that, she said that she could prove it and remarked that she would get Mr Williams’ building pulled down and thereby have the final say.
[31] If nothing else, once Mr Williams became aware of these comments at the end of July, it would have further reinforced the conviction he appears to have formed from the earliest of his dealings with Ms Leckey to the effect that she was determined to use the powers of her position to pursue matters against him, and was demonstrating personal animosity towards him.
[32] Mr Williams’ present solicitors were retained around that time, and Mr Farr wrote a first letter to the Chief Executive on 9 August 2011. Mr Farr’s letter reviewed Mr Williams’ version of his justification for works under s 41, dialogue Mr Williams had had with Mr Collins as to practical means for addressing the fire officer’s concerns, raised numerous concerns as to bias on the part of Ms Leckey, including references to the affidavit that had been sworn by Mr Stewart, and proposed how matters should proceed from there on.
[33] On 15 August 2011, the Chief Executive of WDC swore four informations that related to charges against the appellants under the provisions in the Act. Both appellants were charged with failing to apply for a certificate of acceptance after completing building work without a consent,2 and failing to remedy by compliance
with a notice to fix.3
[34] The solicitors then acting for WDC responded to Mr Farr’s letter of 9 August
2011 by letter dated 16 August 2011. The letter rejected requests that the notice to fix, and dangerous building notices, be withdrawn, rejected the notion that work then required on the building met the test for “urgent work” and also rejected the proposals for pursuing a resolution that had been raised by Mr Farr. The 16 August
letter made no reference to the commitment WDC had made to pursuit of a
2 Section 42(2).
3 Section 168.
prosecution, as evidenced by the Chief Executive swearing the informations the day before.
The substantive determination
[35] Thereafter, both sides appear to have prepared very thoroughly for the defended hearing on the WDC’s prosecutions. Mr Williams’ solicitors raised numerous complaints at inadequacies in the disclosure provided on behalf of WDC pursuant to the Criminal Disclosure Act 2008, and discovery was made on a piecemeal basis until shortly before the substantive hearing.
[36] A five day fixture commencing on 31 July 2012 was allocated for the defended hearing of the charges. At the outset of the hearing, the appellants argued that the informations had not been completed by a person with appropriate authority under the terms of the Act, so that they should be dismissed as nullities. That argument had been foreshadowed by a memorandum filed in Court by counsel for the appellants, and served on solicitors for the WDC the previous week. Without hearing any viva voce evidence, but after hearing argument from counsel, Judge Maze upheld the appellants’ argument and dismissed all four of the informations on
the basis that they constituted nullities.4 The Judge reasoned that s 377 of the Act,
which specifies those who may lay an information under the Act, is in restricted terms. Relevantly, it empowered only WDC as a territorial authority. A special delegation for this purpose was required, and had not been provided.5
Costs application
[37] Thereafter the appellants sought costs. They filed eight affidavits in support of the application, and foreshadowed wide-ranging criticisms of the conduct on behalf of WDC, in support of the application that they be awarded indemnity costs.
[38] The power to orders costs is governed by s 5 of the CCC Act. It provides as follows:
4 Waimate District Council v Williams DC Timaru CRI-2011-076-1459, 31 July 2012 (substantive judgment).
5 Adopting the reasoning of French J in The Wanaka Gym Ltd v Queenstown Lakes District
Council [2012] NZHC 284.
5 Costs of successful defendant
(1) Where any defendant is acquitted of an offence or where the charge is dismissed or withdrawn, whether upon the merits or otherwise, … the Court may, subject to any regulations made under this Act, order that he be paid such sum as it thinks just and reasonable towards the costs of his defence.
(2) Without limiting or affecting the Court's discretion under subsection (1) of this section, it is hereby declared that the Court, in deciding whether to grant costs and the amount of any costs granted, shall have regard to all relevant circumstances and in particular (where appropriate) to—
(a) Whether the prosecution acted in good faith in bringing and continuing the proceedings:
(b) Whether at the commencement of the proceedings the prosecution had sufficient evidence to support the conviction of the defendant in the absence of contrary evidence:
(c) Whether the prosecution took proper steps to investigate any matter coming into its hands which suggested that the defendant might not be guilty:
(d) Whether generally the investigation into the offence was conducted in a reasonable and proper manner:
(e) Whether the evidence as a whole would support a finding of guilt but the charge was dismissed on a technical point:
(f) Whether the charge was dismissed because the defendant established (either by the evidence of witnesses called by him or by the cross-examination of witnesses for the prosecution or otherwise) that he was not guilty:
(g) Whether the behaviour of the defendant in relation to the acts or omissions on which the charge was based and to the investigation and proceedings was such that a sum should be paid towards the costs of his defence.
(3) There shall be no presumption for or against the granting of costs in any case.
(4) No defendant shall be granted costs under this section by reason only of the fact that he has been acquitted or that any charge has been dismissed or withdrawn.
(5) No defendant shall be refused costs under this section by reason only of the fact that the proceedings were properly brought and continued.
[39] Judge Maze convened a two day hearing for the costs application on 14 and
17 June 2013. On 26 June 2013, the Judge delivered a reserved judgment in which
she upheld a number of the serious criticisms levelled at the WDC’s conduct. The Judge took the view that indemnity costs would not be appropriate unless bad faith was made out. She was not satisfied that it was, and accordingly awarded the appellants the sum of $80,000, together with disbursements to be approved by the Registrar, in lieu of the claim for indemnity costs that at that stage stood at some
$170,000.
[40] In analysing the application, the Judge posed for herself a series of 10 questions which more or less reflected the criteria in s 5(2) of the CCC Act, in some respects tailored to the circumstances of the application before her. On the issue of whether WDC acted in good faith in bringing and continuing the proceedings, the
Judge reached the following factual conclusions:
WDC failed to consider delegation of powers when it should have done
so;
WDC failed to consider alternatives to Ms Leckey’s view;
WDC through its agents was not open about its decision to prosecute; WDC ignored timely warnings about invalid delegations of power;
WDC delayed in disclosing relevant information;
WDC failed adequately to address the personal conflict between
Ms Leckey and Mr Williams;
Ms Leckey and WDC withheld disclosure without good cause.
[41] The Judge followed her analysis that led to these factual conclusions with the following:
I am satisfied then that it is proper to conclude that WDC has not acted in good faith in bringing and continuing these proceedings. I am unable to resolve the many factual differences arising (eg whether Mr Donaldson told Mr Williams to do the work or not, whether the affidavit of Mr Stewart is
credible and reliable, and so on), nor am I able to resolve the question of guilt or innocence, and legal issues which, had WDC been able to prosecute legally, would have arisen. I recognise the limitations of this application and the scope of my enquiry. Failure to do so would inevitably mean the very matters which could never be aired in the prosecution would engage the Court in the costs application. That is illogical and would circumvent the determination that the informations were nullities.
[42] The Judge went on to draw a distinction between her finding that WDC did not act in good faith as not necessarily being the same as finding that it had acted with positive mala fides.6 She used this distinction as one of the reasons for not making an award of indemnity costs.7
The appeal
[43] Mr Farr accepted that in pursing the appeal from the Judge’s dismissal of the appellants’ application for indemnity costs, he was mounting a challenge to the exercise of a discretion. He urged that I adopt the approach that Woodhouse J used in the case of Yoon v K.8 That judgment recognised and distinguished a discretion exercised at two points. First, under s 5(1) of the CCC Act, when informations are dismissed, the Court may order that the defendant be paid such sums as the Court
thinks just and reasonable towards the cost of the defendant’s defence. Woodhouse J saw that as a discretion applying to a threshold question as to whether costs should be awarded and then what the quantum of them should be. Relevant to the present case, a second discretion arises as to whether, under s 13(3) of the CCC Act, costs ought to be awarded above the scale. In terms of s 13(3) of the CCC Act, the discretion depends on a determination by the Court that the case was one of “special difficulty, complexity or importance”.
[44] On the present appeal, the Court is concerned with that second discretion and the manner in which it was exercised by the District Court Judge. As with all appeals from the exercise of a discretion, the appellate court should not interfere
unless satisfied that the judge who made the order acted on a wrong principle or
6 Costs judgment at [19].
7 Costs judgment at [23].
8 Yoon v K HC Auckland CIV-2008-404-1141, 28 August 2008.
failed to take into account some relevant matter, or took account of some irrelevant matter, or was plainly wrong.9
[45] Mr Quinn accepted that that was the approach the Court is required to take in this appeal. However, he criticised some aspects of Mr Farr’s argument as extending beyond the criteria for appellate intervention, by inviting me to re-evaluate factual findings, and reach a contrary conclusion.
[46] The grounds of appeal were:
the Judge erred by not granting indemnity costs after making findings of
fact that warranted such an award;
having found a number of instances of lack of good faith on WDC’s part, the Judge erred in finding that that did not constitute bad faith on WDC’s
part;
in light of the finding that WDC “ought never to have” laid the informations, that they were a nullity and that there was a “high degree of negligence” by WDC, the Judge erred in concluding nevertheless that she
was unable to find the appellants “innocent”;
alternatively, the evidence relied upon as to the quantum of the
appellants’ costs was flawed;
further, the Judge erred by not allowing the appellants to cross-examine the respondent’s witnesses where there were substantial disputes over material facts which, if resolved, would have supported the claim to
indemnity costs.
[47] This last ground was dealt with as a preliminary issue by the District Court
Judge, and was addressed at the outset by Mr Farr. The adverse consequences of the appellants not being able to pursue definitive findings on factual matters, some of
9 Yoon v K at [31]–[33]. As to the standard for interfering in decisions reflecting the exercise of discretion, K v B [2010] NZSC 112, [2011] 2 NZLR 1.
which they anticipated would justify additional criticisms of WDC, thereafter permeated many submissions on the other grounds. A number of Mr Farr’s propositions were advanced on the inappropriate basis that his witnesses’ views on contested matters ought inevitably to be accepted.10
Refusal of leave to cross-examine deponents
[48] It is convenient to address the criticism of the Judge for not permitting cross- examination, at the outset. The Judge issued a separate pre-hearing ruling on the application for leave to cross-examine. The Judge adopted the reasoning in Edwards v Toime for the proposition that the focus of the inquiry on a costs application must be on disposition of the substantive proceedings as nullities, and the evidence that
was available on that issue.11 The Judge found that s 84 of the Evidence Act 2006
does not require cross-examination in all cases, and that insufficient relevance or low probative value likely to arise from cross-examination would be relevant. The Judge concluded that, given the limited extent of the inquiry permitted on the costs application and the definition of the relevant issue, it could be accepted that the prejudicial effect of cross-examination on matters going beyond the issue exceeds its probative value and would therefore be inadmissible.
[49] Mr Farr submitted that the appellants’ prospects of having indemnity costs ordered against the WDC were harmed by the Judge’s refusal to permit cross- examination of WDC’s deponents. The argument was advanced in anticipation that had that been permitted, there would also have been cross-examination of deponents who had sworn affidavits in support of the appellants’ application. Mr Farr went so far as to suggest that if I was not in a position to make findings in the appellants’ favour on criticisms such as of Mr Donaldson and Ms Leckey, then the matter ought to be referred back to the District Court with a direction for cross-examination to
occur so that that Court could make findings on contested factual issues.
10 For example, Mr Farr submitted that Ms Leckey had issued and maintained the notice to fix on the basis that the appellants required a building consent “… despite knowing full well that the appellants were entitled to undertake the works without a building consent under schedule [sic]
41(1)(c) of the Act”.
11 Edwards v Toime HC Wellington CRI-2006-485-118, 7 December 2006.
[50] A sense of proportionality must dictate the outcome of this challenge. Conceptually, the Judge could have allowed cross-examination. It would no doubt have materially increased the length of the costs argument from two days to possibly four or more days. Mr Farr’s concern was that the Judge was unable to make definitive factual findings on contested factual issues that went both to the propriety of the conduct of the prosecution by WDC, and also the merits of the appellants’ defence to the prosecutions.
[51] However, having pursued a preliminary challenge to the WDC’s jurisdiction to commence the proceedings in the manner that it had, the appellants had to accept the consequences of bringing the prosecutions to an end when they succeeded with such arguments. They could not reasonably expect to have it both ways. I am not persuaded that there was any error by the Judge in declining leave to cross-examine, and indeed I am satisfied that that decision was correct.
Factual findings warranted indemnity costs, and such findings meant WDC
acted in bad faith
[52] It is convenient to consider the first two grounds of appeal together. As a matter of law, Mr Farr argued that an absence of good faith necessarily amounted to bad faith. Alternatively, that the relative seriousness of the criticisms made in the Judge’s findings against WDC were, in any event, sufficient to justify indemnity costs as being just and reasonable in all the circumstances of this case.
[53] On the point of law, Mr Farr relied on a decision of mine in Davidson v Rogerson.12 In the context of a purportedly genuine but misguided private prosecution, which had resulted in a discharge part-way through a preliminary hearing in the Wanganui District Court, indemnity costs had been ordered. Prominent among the arguments raised by the unsuccessful self-represented litigant on the appeal was the notion that he was not nearly as wicked as would be required for a finding of bad faith against him. I observed:13
What the criterion in s 5(2)(a) contemplates as relevant is whether the prosecution was brought and continued “in good faith”. Clearly, the absence
12 Davidson v Rogerson HC Wanganui CRI-2008-083-500354, 1 April 2009.
13 At [21].
of good faith will be relevant to a successful defendant’s entitlement to costs. Quite understandably, lawyers and Judges treat absence of good faith as equalling bad faith. It was very clear to me from the repeated assertions by Mr Davidson that he was not “wicked” that he treated the finding that the prosecution had been pursued in bad faith as an adverse moral judgement against him.
[54] Regrettably for Mr Farr, I am not satisfied that the relatively broad terms in which I equated absence of good faith with bad faith can apply in all contexts. The relevance attributed to good faith in s 5(2)(a) of the CCC Act is because an absence of good faith in the bringing and continuation of proceedings that ultimately fail will often be prominent among the factors that relevantly guide a decision on an application for costs on behalf of a successful defendant.
[55] As I debated with counsel, there are likely to be situations in which an absence of good faith can be attributed to the manner in which a prosecution was brought or continued, without establishing that those responsible for the prosecutorial conduct were motivated by malice or other improper motives in relation to the defendant.
[56] Bringing a prosecution of any sort requires objectivity and motivation only by proper purposes governing the bringing of such prosecutions. I am therefore not persuaded that the Judge erred as a matter of law by distinguishing an absence of good faith from whether bad faith, in the sense of mala fides, was made out.
[57] Turning then to the factual findings on which the Judge relied. On the one hand, Mr Quinn advised that the WDC did not challenge any of the findings that contributed to the conclusion that there had been an absence of good faith. On the other hand, he spent some time inviting me to see them in a somewhat different light that would not justify the same level of criticism of WDC. For instance, he submitted there was evidence that the WDC had considered alternatives to prosecution and that it was appropriately seen as a last resort.
[58] As to the criticism that the WDC ought to have appreciated the inadequacy of its process and therefore the lack of formalised delegated authority to the Chief Executive, Mr Quinn referred to an analysis by IANZ (International Accreditation New Zealand). He submitted that the strong recommendation in a
review by that body that the building consent authority (BCA) component of the WDC “review documents describing roles, responsibilities and authorities to make the line of authority from senior management clear and to confirm consistency between related documents” was not an adequate warning of the need to check the existence of delegated authority for the Chief Executive to initiate a prosecution. The Judge had inferred that WDC did not take legal advice on how it could delegate authority to initiate a prosecution, but Mr Quinn suggested there was no sufficient basis for that inference to be drawn.
[59] Whilst the points raised by Mr Quinn might justify taking a somewhat more benign view of the course of the prosecution by WDC, it was realistic of him not to directly challenge the components of the factual analysis relied on by the Judge in concluding there had been an absence of good faith.
[60] From the appellants’ perspective, Mr Farr argued that a more serious level of inappropriate or wrongful conduct could be attributed to WDC, and that on the Judge’s findings, not only was there an absence of good faith, but there was bad faith as well.
[61] Perhaps the most troubling aspect of the WDC’s motivation is the evidence of the Deputy Mayor, Councillor McIlraith, to the effect that, in exercising its prosecutorial discretion, WDC was more concerned to avoid a personal grievance claim by Ms Leckey, than by any consideration as to whether she should be stood aside from directing the conduct of the prosecutions. That evidence has not been challenged directly in any way, and is credible in light of all the history of the matter. Where a territorial authority considers exercising its power to prosecute under the Act, but allows its senior management and governance considerations on whether to pursue a prosecution to be subverted by an employment relations concern, then the prosecution in those circumstances is affected by an improper purpose and is certainly pursued with a lack of good faith.
[62] There appear to be numerous causes for concern at the integrity of Ms Leckey’s involvement. An objective analysis of the grounds for prosecution, and whether a successful defence might exist, required an analysis of whether there was a
sufficient combination of the urgency of the work required relative to the exemption in s 41, plus the scope of “like for like maintenance” that would fall within Schedule
1 of the Act. There was no disclosure of any analysis addressing the s 41 exemption.
[63] Mr Farr cited a troublingly long list of delayed and inadequate disclosure. Perhaps most pointedly, the sequence of emails from and to Ms Leckey on
4 February 2011, when first discovered, omitted Ms Leckey’s acknowledgement of the advice she had received from DBH, and her derogatory criticism of the “nutters” in Wellington. Mr Farr was on solid ground in submitting that any consideration of the email chain must have included consideration of that component of it, and that its omission was inexcusable.
[64] Ms Leckey’s affidavit sworn on 3 December 2012 in opposition to the application for costs recounts the enquiries she made of DBH on 4 February 2011 as involving a discussion with the “helpline operator”. In rationalising her disagreement with the advice she received, she deposed:
I was also unaware of the helpline operator’s technical background and
competency.
[65] At the time of swearing that affidavit, WDC had not disclosed Ms Leckey’s handwritten note made on 4 February 2011 in respect of that conversation. It was only discovered, after numerous requests, on the second day of the costs hearing. Its content recorded that the helpline operator had referred her on to another person identified as “an expert”. That is a troubling inconsistency, given the circumstances in which it was only belatedly revealed by disclosure of a document that ought to have been disclosed from the outset.
[66] In Mr Farr’s criticisms of WDC’s repeated refusals to stand Ms Leckey down from dealing with this issue, Mr Farr relied on a good practice guide issued by the Controller and Auditor-General in June 2007 on managing conflicts of interest. The document provided guidance for public entities and addressed ways of dealing with conflict of interest on the basis of a definition that it included situations that “may be labelled as bias or pre-determination”. I did not accept Mr Farr’s characterisation of the continued involvement of Ms Leckey, when she was motivated by animosity
towards Mr Williams, as a “conflict of interest” in the classic sense. However, there was a conflict of interest for WDC once its ability to objectively consider alternatives to a prosecution was compromised by its interest to minimise the risks of an employment relations dispute with Ms Leckey.
[67] Competent management of the matter by WDC ought to have recognised that its ability to deal with the prosecution was compromised by its own conflict of interest in minimising the risk of an employment relations dispute with Ms Leckey. At the very latest, by the time Mr Stewart’s affidavit was disclosed to the WDC in August 2011, its senior officers were on notice of a tenable concern that Ms Leckey was not dealing with the matter objectively on its merits. Unless conflicted by a relatively compelling employment relations concern, a reasonable territorial authority in WDC’s position would have removed her from involvement, or at least have documented a measured consideration as to whether it should do so.
[68] One form of analogy is the test used for the tort of misfeasance in public office. In considering the approach to bad faith in that context, I do not want to suggest further litigious avenues for the appellants. To the contrary, any further litigation in this unhappy saga is to be positively discouraged.
[69] The tort of misfeasance in public office requires the mental element on the part of a defendant involving either targeted malice towards the plaintiff, or non- targeted malice where the defendant appreciates that he or she is not proceeding lawfully, but continues with the course of conduct being reckless to the prospects of
causing harm to others.14 Both targeted and non-targeted malice are treated in that
tortious context as forms of bad faith.
[70] Using that approach, it seems likely that bad faith could be made out on the part of Ms Lecky. Ms Leckey was not on trial, and her interests were not represented. It is therefore inappropriate to make definitive findings adverse to her.
However, Mr Farr submitted that she was effectively running the prosecution against
14 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013]
2 NZLR 679 at [40]–[45].
the appellants because more senior officers at WDC were apprehensive of the consequences of removing control from her.
[71] In the context of this case where Ms Leckey did not have delegated authority to prosecute, I do not consider that her apparent animosity towards Mr Williams, and her lack of objectivity, can constitute bad faith that is attributable to the WDC. Lawful responsibility for the prosecution lay with the Chief Executive and the Council. Bad faith is not made out against them to the extent that it requires a form of malice. This is therefore a context in which it was appropriate for the Judge to distinguish absence of good faith on the part of WDC as a whole in the bringing of the prosecution, from a positive finding of bad faith. I am not satisfied that the Judge erred in that analysis.
[72] The associated argument was that the Judge had, in effect, set the bar too high in what was required before indemnity costs are appropriately awarded. Mr Farr submitted that the seriousness of the findings adverse to WDC made by the Judge justified an award of indemnity costs, and that was the outcome she should have ordered.
[73] The Judge had cited a decision of Chisholm J for the proposition that indemnity costs are likely to be reserved for exceptional cases probably involving bad faith or other gross misconduct.15 Mr Farr argued that even if WDC’s conduct was not correctly characterised as being in bad faith, then it was bad enough to justify an award of indemnity costs, and “just and reasonable” outcomes can justify indemnity costs even if bad faith is not made out to such a high standard.
[74] In considering whether the second discretion under s 13 of the CCC Act applied, the Judge adopted earlier High Court authority that conduct in bad faith or negligence on the part of the prosecution may qualify a case as one of “special difficulty” for the purposes of s 13.16 The Judge treated those features as being
present, and also considered that the case had special importance because it
15 R v Mather HC Christchurch T33/97, 26 July 1999.
16 Citing T v Collector of Customs HC Christchurch AP167/94, 28 February 1995.
highlighted the importance of an informant’s compliance with legislative duties. It
was therefore a case meriting departure from the scale.
[75] An entitlement to indemnity costs in an abstract or absolute sense is rarely likely to determine the quantum of a costs award. The Court will always be concerned to assess the reasonableness of costs actually incurred, relative to the scale of the task that successful defendants had to undertake.
[76] Here, the Judge ordered costs at some 47 per cent of the costs incurred up to the costs hearing. If the full extent of the appellants’ costs to that point were reasonable, then 47 per cent appears relatively low in light of the pursuit of a prosecution in the absence of good faith. I therefore accept Mr Farr’s criticism that the Judge appears not to have made an award that appropriately reflected the relative seriousness of the miscarriage of the prosecution by WDC.
[77] However, the utility for the appellants of making out that appeal point depends on an assessment of the reasonableness of the level of costs that were, in fact, incurred. I address that issue below.
Should the appellants have been found “innocent”?
[78] In determining the proportion of costs the Judge was prepared to grant to the appellants, she was influenced by the declaration that the prosecutions were a nullity at the outset, with the consequence that the Court was unable to form a view on whether the factual circumstances relied on by WDC could have made out breaches of the Act. The just and reasonable outcome in terms of costs can appropriately be influenced by the prospect that, had the WDC lawfully delegated the power to commence the prosecution, then its position may ultimately have been vindicated. That consideration may seem unfair to the appellants where they had thoroughly prepared for and believe they would have successfully defended the prosecutions on their merits. From their perspective, they should not receive a smaller costs award because their successful pre-emptive strike deprived them of the opportunity to be vindicated on the merits.
[79] The contrary position for WDC is that they ought not to be punished as if the prosecutions would inevitably have failed, when a jurisdictional deficiency prevented them having their day in Court. In the end, the ultimate outcome on the merits is an otherwise relevant factor that has to be discarded. If that means that the prospect (however relatively likely or unlikely) that the prosecutions might otherwise have been successful, reduces what is a just and reasonable contribution to the appellants’ costs, then that is simply a consequence of their having elected to pursue the pre-emptive strike, and being successful in doing so. In this context, the successful appellants cannot have it both ways.
[80] I have upheld the Judge’s decision not to allow cross-examination. On the state of the affidavits, it was unrealistic for the appellants to contend for a substantive finding that they would have been successful in their substantive defence of the prosecutions. Having adopted the tactics that they did, the appellants had to be satisfied with a successful outcome short of a determination for costs purposes that they were “innocent”.
Incorrect comparison of the appellants’ and respondent’s costs
[81] Mr Farr criticised the Judge for comparing the costs incurred on behalf of the appellants up to the opposed costs hearing on an incorrect basis. He also criticised the Judge for overlooking a breakdown of the appellants’ legal costs up to that time. The Judge contrasted costs sought on behalf of the appellants up to the time of argument of the costs application of some $170,000 against WDC’s indicated costs of approximately $69,000 in relation to the bringing of the prosecution, without any disclosure of additional costs incurred in defending the costs application.
[82] Instead of those figures, Mr Farr argued that the respondents’ costs in the criminal proceedings were some $70,900, without taking into account a discount of some $3,900, and possibly a larger discount that had not been quantified. Subsequent to that, Mr Farr identified respondents’ costs of some $27,700 until the end of November 2012 and then (with different solicitors) a further $40,000 up to the month of the costs hearing in the District Court. On Mr Farr’s calculation therefore
the comparison ought to have been between an amount in a range of $139,000 to
$143,000 for the respondent and $170,000 for the appellants.
[83] Mr Farr also reproduced from an exhibit to an affidavit of Mr Williams a breakdown of the $150,000 that the appellants had spent up to September 2012.
[84] I do not accept that it was an error for the Judge to have regard to the extent of legal fees incurred by WDC in bringing the prosecution. Subject to being satisfied that the amounts provided are accurate, the extent of costs incurred on the other side of litigation are a potentially useful comparator in assessing the reasonableness of costs claimed by a successful party. That is not to say that there should be an expectation that the costs be equivalent. Depending on the nature of the case, one side may have to assume larger burdens than the other.
[85] Mr Farr’s more focused complaint was that the Judge’s comparison of
$69,000 incurred in prosecuting the informations was substantially inadequate as a comparator with the appellants’ claim to $170,000. On Mr Farr’s analysis, solicitors for WDC incurred fees of some $74,000 (GST inclusive) up to the termination of the prosecutions. That sum included the acknowledged discount of some $3,900. On his analysis, it could have been increased by the omission of the then solicitors for WDC to charge for the more senior of the two counsel, for the time in Court during which the preliminary jurisdictional issue was argued. The comparable figure to the same stage in terms of the appellants’ costs was some $115,000 and Mr Farr submitted that proportionately greater legal expenses to that extent were readily justified because of the larger task that had to be undertaken on behalf of the appellants.
[86] The breakdown of the appellants’ costs, as deposed to by Mr Williams in an affidavit in September 2012, is likely to include some relatively arbitrary distinctions. The total at that time was some $150,000, of which it appears that
$35,200 were incurred after the appellants’ success in having the informations declared nullities. Of the remaining $115,000, some $60,400 was incurred in briefing 20 witnesses, issuing summonses, and preparation for trial. In addition, some $10,900 was charged for legal research on the preliminary issue of delegation
of authority and preparing submissions on that topic. If, say, $5,000 of the $60,000 for briefing witnesses and preparation for trial is allocated to matters other than the briefing of witnesses, then that would mean that legal fees incurred were an average of $2,750 for each of 20 witnesses.
[87] The costs of $10,900 on the preliminary jurisdiction issue amounts to a little more than 36 hours, at a charge-out rate of $300 per hour.
[88] Making every allowance for the combative manner in which the prosecutions were dealt with, and the extent of the factual matters Mr Williams perceived as appropriately briefed, I am not persuaded that these components of the costs were reasonable. The conclusion I am inevitably drawn to is that the defence of these prosecutions was overworked.
[89] It would be no answer that more or less comparable costs were incurred on behalf of the WDC. Two wrongs do not make a right. In the end, the extent of a just and reasonable recovery of costs cannot be punitive on the ratepayers of WDC to the extent that they are required to bear the costs of a Rolls Royce defence when the issues at stake could only ever warrant a Toyota.
[90] I am satisfied that the Judge confined the award she made to less than was just and reasonable because of her finding of the absence of bad faith. The relevant circumstances may have been sufficient to warrant a just and reasonable award at or near to indemnity costs. However, the costs actually incurred were not reasonable and in the end I consider the amount of $100,000 is what best reflects the just and reasonable recovery for the costs up to the dismissal of the informations.
Costs of claiming costs
[91] The appellants’ approach was to treat their claim for indemnity costs as extending in the same way to the costs incurred in claiming costs for the successful defence of the prosecutions. I am not persuaded that that approach is necessarily appropriate. Different considerations may apply to the justification for, and reasonableness of, costs incurred in pursuit of a claim under the CCC Act.
[92] Here, Mr Farr argued that full indemnification for the costs incurred in pursuing the costs application was justified because of the unreasonable stance adopted on behalf of WDC in refusing to acknowledge any liability, and not being prepared to take any steps towards negotiating a settlement of the appellants’ claim for costs.
[93] Although not entirely vindicated, the appellants had a substantial measure of success in the District Court in circumstances that triggered a presumptive entitlement to an award of costs. It does not follow that the appellants should be fully indemnified. I consider a contribution of two thirds of reasonable costs for pursuit of the application under the CCC Act is appropriate. I discern the amount to be, in round figures, the difference between the $115,000 incurred up to the successful termination of the prosecutions, and the figure of $170,000 stipulated at the time of the argument on the costs application before the District Court. That figure of $55,000 is certainly at the upper limit of what would be reasonable costs for the scale of work involved. Two thirds of that amounts to $36,300.
Costs on the appeal
[94] Again, the appellants have had a measure of success on their appeal. The same caution operates that the proportion of costs awarded on successfully defending the prosecution does not necessarily apply to the proportionate recovery of costs on an appeal. Given the thoroughness with which all previous steps in the proceedings were pursued, it is perhaps unrealistic to expect that the appeal could have been pursued on any more confined basis than it was. Nonetheless, it has to a degree reflected the extent to which prior steps in the proceedings were overworked. I consider the appropriate award of costs in relation to the appeal to be $10,000.
Summary
[95] The Judge erred in characterising the relative seriousness of conduct required to justify an award of costs at or near full indemnity levels. In other relevant respects, the Judge’s decision was correct.
[96] Even if an entitlement to full indemnity costs was made out, the costs actually incurred were more than was just and reasonable. Accordingly, a fresh assessment of what constitutes a just and reasonable award is appropriate.
[97] The costs order made in the District Court is quashed and substituted with the following orders:
(a) The appellants are entitled to costs on successful defence of the prosecutions in the amount of $100,000.
(b)The appellants are entitled to costs on pursuit of the costs application in the District Court of $36,300.
(c) The appellants are entitled to costs on the present appeal of $10,000.
Dobson J
Solicitors:
C & F Legal Limited, Nelson for appellants
DLA Phillips Fox, Wellington for respondent
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