ALARM NEW ZEALAND LIMITED v 15 HOPETOUN LIMITED [2016] NZHC 2080

ALARM NEW ZEALAND LIMITED v 15 HOPETOUN LIMITED [2016] NZHC 2080 [2 September 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2014-404-1293[2016] NZHC 2080BETWEEN ALARM NEW ZEALAND LIMITEDPlaintiffAND 15 HOPETOUN LIMITEDDefendantAND AUCKLAND COUNCILThird PartyOn the papersAppearances: B M Stainton for the Plaintiff/ApplicantR Butler for the Defendant/RespondentJudgment: 2 September 2016JUDGMENT AS TO COSTS OF THOMAS JThis judgment was delivered by me on 2 September 2016 at 4pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:.Solicitors:Stainton Chellew, Auckland.Gregory Simon Law, Auckland.Introduction[1] On 27 April 2016, I dismissed an application for an interim injunction in respect of two of four car parks leased by the plaintiff, Alarm New Zealand Ltd (Alarm NZ), from the defendant, 15 Hopetoun Ltd. I granted the application in respect of the remaining two car parks.1 The injunction sought was to prevent the defendant from selling, transferring, or providing exclusive possession (other than to Alarm NZ) to any of the car parks.[2] 15 Hopetoun Ltd now seeks costs on both the interim injunction applicationand the plaintiff's application for a preservation/freezing order. Alarm NZ opposescosts being awarded.Factual Background[3] Alarm NZ had leased ten car parks from 15 Hopetoun Ltd, as well as Level 3 of the building. The lease was for 10 years from 21 September 2012, with a right of renewal for five years. The car parks leased were not identified, although Alarm NZ in practice used specific car parks.[4] 15 Hopetoun Ltd required Alarm NZ to vacate the property while it undertook renovations, precipitating negotiations between the parties about dealing with the possible disruption. The relocation came after interim court orders were made on 29 May 2014, which were replaced by undertakings from Hopetoun on 19 June 2014.[5] The plaintiff claimed that, during this period, car parks leased to it were sold to a third party and it sought to stop that by way of an interim injunction. In the circumstances and for reasons set out in my decision including the interests of the purchaser, the interim injunction was not granted. The orders in respect of the other car parks were made without opposition.1 Alarm New Zealand Ltd v 15 Hopetoun Ltd [2016] NZHC 813.[6] Initially, the application for an interim injunction was set down with an application by 15 Hopetoun challenging a freezing order made by Christiansen AJ. The order restrained the defendant from disposing of or diminishing the value of its right, title and interest (legal or beneficial) in Level 3, pending further order of the Court. The freezing order was subsequently discharged by agreement.[7] In my judgment, I said:In the usual course, costs should be awarded now. However, in the circumstances of this case, there would seem to be good reason to reserve costs pending the outcome of the substantive hearing. If the parties wish to dispute that proposed course, they are to file and serve memoranda within 28 days of this decision.SubmissionsDefendant's submissions[8] The defendant applies for costs both for the interim injunction proceeding and the wasted costs of dealing with the application for a preservation/freezing order.[9] The defendant submits that costs should be awarded now, and points to thefact that it has already paid costs on the plaintiff's successful application for furtherdiscovery. Rule 14.8 provides that costs must be fixed on an opposed interim injunction unless there are special reasons to the contrary. The defendant further says that no trial date has been set down and that having to wait until possibly next year to receive costs would be an inordinate delay.[10] The defendant points to the fact that the freezing order application began as a composite application for a preservation order and freezing order, and that the plaintiff only advised they were no longer pursuing the preservation order on 28 January 2016, after the defendant had already responded to both. It says that in the freezing order application, the plaintiff sought to restrain the defendant from dealing with its freehold title in respect of Level 3 and did not refer to car parks.[11] The defendant refers to this on the basis that the plaintiff has claimed that the injunction application overtook the freezing order, but in fact the freezing order wassought independently of the car park issues. The order was unsustainable from theoutset, in the defendant's submission, and the application was withdrawn at the last minute after steps had been taken by the defendant.[12] The defendant says that the plaintiff was not successful, as the defendant never opposed the orders which were granted in respect of two of the car parks.Plaintiff's submissions[13] The plaintiff seeks that costs are reserved until the outcome of the final hearing. It says that it was successful in obtaining a freezing order, on which it received costs.[14] In relation to the review application, the plaintiff says that once they itreceived the defendant's full explanation concerning the third party in respect of thecar parks, it was apparent the real issues were the car parks. The plaintiff considered there had been enough judicial comment on the plaintiff's case, the defendant was aware of the plaintiff's position, and the freezing order was therefore no longernecessary. The plaintiff rejects the view that the freezing order was without merit.[15] In relation to the interim injunction, the plaintiff notes that it was successful in obtaining an interim injunction before Whata J prior to the hearing before me, and that both parties were ultimately successful in the main proceeding since some orders were made. The plaintiff says that the decision turned on the effect on third parties and was critical of the behaviour of the defendant, who should not therefore benefit in costs terms.[16] The plaintiff emphasises the Court's discretion as to costs and says that, if the Court is minded to make costs orders, it seeks costs for the proceedings in which they were successful: the freezing order application, the interim injunction before Whata J and the one before me.Analysis[17] Rule 14.8 of the High Court Rules provides:(1) Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—(a) must be fixed in accordance with these rules when the application is determined; and(b) become payable when they are fixed.(2) Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.(3) This rule does not apply to an application for summary judgment.[18] The rule reflects the fact that the merits of an interim proceeding will often differ from the substantive merits of the case.2 However, there is a residual discretionwhere there are "special reasons to the contrary" not to fix and order costs. Thatdiscretion has been exercised previously, in cases where "unresolved factual disputes about the appropriateness of the interim relief application" gave rise to "special reasons to decline to make an order for costs", as the Court had not had anopportunity to examine the merits of the case.3[19] In my view there are special reasons pertaining to this case which suggest that it would be appropriate not to order costs at this stage.[20] The defendant was successful overall in the interim injunction application. Although the plaintiff was granted interim orders in respect of two car parks, those orders were made without opposition. However, the defendant did attempt to suggest that there was no need and no jurisdiction to make the relevant orders because there was no threat of imminent loss of the plaintiff's rights to those spaces. The order was granted nonetheless, as I considered the defendant's past behaviour gave weight tothe suggestion that there was a risk of it reneging on its commitments. There was, therefore, a clear finding of some fault on the part of the defendant and some measure of success to the plaintiff.2 Chapman v Badon Ltd [2010] NZCA 613, (2010) 20 PRNZ 83 at [12].3 Kenealy v Morton-Jones [2015] NZHC 297 and Commercial Factors Ltd v Veda Advantage (NZ) Ltd HC Auckland CIV-2010-404-6798, 21 June 2011, where interim injunction applications were discontinued.[21] Further, the reason the interim injunction was not successful was that theplaintiff's rights to the car parks in question had already been abrogated by thedefendant, who had sold them to a third party whose rights would have been affected by the orders. It was a finely balanced decision and the application was dismissed because of the effect on the third party. The behaviour of the defendant gave rise to clear concerns as to possible future encroachment on the plaintiff's rights.[22] The allegations about the defendant's behaviour should be determined beforecosts are awarded to either party. The matters at the heart of this interim injunction will be the precise matters before the Court at trial of any substantive hearing.4Although links between the merits of a party's interim application and any subsequent substantive success will not, as a general rule, justify deferring entitlements to costs,5 it can be an additional factor which adds to the overall appropriateness of deferring costs orders.[23] The particular nature of the case, and my findings as to the reasonableness ofthe defendant's actions, are such that costs should be reserved until the outcome ofthe substantive proceeding, in the exercise of the Court's discretionary power to doso.Freezing order[24] The freezing order was granted by Christiansen AJ in favour of the plaintiff. Costs were also awarded to the plaintiff. The defendant subsequently came to the view that the Judge did not have had the jurisdiction to make such an order. The defendant then sought a review of that order.[25] On 19 April 2016, the plaintiff consented to the freezing order being discharged, and withdrew its opposition to the review application. 19 April was the day before the hearing of the interim injunction and review applications. Although the freezing order was discharged by consent, the judgment of Christiansen AJ still stands.4 In Ip v Ip [2016] NZHC 528 at [14], the lack of confluence between the issues in the interim application and the substantive application was a basis for not reserving costs.5 Strathboss Kiwifruit Ltd v Attorney-General [2015] NZHC 2482, (2015) 23 PRNZ 64 at [24].[26] It is not clear who was the successful party, as the proceeding was in essence discontinued. Although the review application was brought by the defendant, the fact that the plaintiff conceded and discharged the orders can be seen as analogous to a plaintiff discontinuing, in which context a plaintiff typically pays the defendant'scosts.6 However, the cases referred to above – Kenealy-Jones v Morton andCommercial Factors Ltd v Veda Advantage (NZ) Ltd as well as Brother International (NZ) Ltd v Calidad Distributors Pty Ltd,7 amongst others, suggest that where an interim application has been discontinued and there is no ability to assess its merits, costs may well be best reserved pending the substantive outcome of the proceeding.[27] There was clearly some cost to the defendant in preparing for the freezing order review which was not necessary. The plaintiff could have assessed its position earlier, given the jurisdictional points were made promptly following the hearing. However, a plaintiff who discontinues may have chosen to discontinue because it has achieved its end by other means, or for reasons not connected to the strengths or weaknesses of the plaintiff's case.8[28] I appreciate the arguments in support of awarding the defendant costs, given the time spent in preparation on this issue. There is also some merit in letting costs lie where they fall, given the ambiguity around the jurisdiction issue. However, in the context of this case, I consider it appropriate, for similar reasons as apply to the interim order application, that costs should be are reserved until the outcome of the substantive proceeding.Result[29] Costs of the interim injunction application and review of the freezing order are reserved pending the outcome of the substantive hearing._______________________Thomas J6 High Court Rules, r 15.23.7 Brother International (NZ) Ltd v Calidad Distributors Pty Ltd [2016] NZHC 1152.8 Fong v Wong (2010) 20 PRNZ 22 (HC)at [11].