MALKHASIAN v NZ BRICK DISTRIBUTORS LIMITED PARTNERSHIP [2021] NZCA 240

MALKHASIAN v NZ BRICK DISTRIBUTORS LIMITED PARTNERSHIP [2021] NZCA 240 [8 June 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA37/2021[2021] NZCA 240BETWEEN ANDREW SHAUNT MALKHASIAN ANDJEAN ANN MALKHASIANApplicantsAND NZ BRICK DISTRIBUTORS LIMITEDPARTNERSHIPRespondentCourt: Cooper and Courtney JJCounsel: V A Whitfield for ApplicantsJ E Standage and JJK Spring for RespondentJudgment:(On the papers)8 June 2021 at 3 pmJUDGMENT OF THE COURTThe application for leave to appeal is granted.____________________________________________________________________REASONS OF THE COURT(Given by Courtney J)Introduction[1] In District Court proceedings arising out of a construction contract, Mr andMrs Malkhasian obtained an order for third party discovery against NZ BrickDistributors Ltd (NZBD). Judge Mabey QC refused to make a costs order in favourof NZBD because of its conduct in complying with the order. Instead he awardedcosts to Mr and Mrs Malkhasian.1 On appeal, Brewer J overturned the District Courtdecision and awarded NZBD costs.2[2] A High Court decision on appeal from the District Court is final unless a partyobtains leave to appeal to this Court.3 Applicants are required to apply for leave firstfrom the High Court and, failing that, from this Court.4 Brewer J refused leave toappeal.5 Mr and Mrs Malkhasian seek leave to appeal to this Court.[3] The test for leave to bring a second appeal is settled. The appeal must raisesome question of law or fact capable of bona fide and serious argument in a caseinvolving some interest, public or private, of sufficient importance to outweigh thecost and delay of the further appeal.6[4] The applicants say that there are bona fide and serious issues arising on theproposed appeal in that:(a) there is conflict between the District Court and High Court as to thecorrect approach to non-party costs where there has beennon-compliance by the non-party and there is a bona fide and seriousargument that the High Court Judge wrongly applied the settledprinciples;(b) there is a significant public interest in resolving the approach taken bythe High Court because of the risk it will be applied to future decisionsinvolving non-party costs; and(c) there is a personal interest that justifies a second appeal — the outcomein the High Court was that costs of $8,808 were awarded to the1 Malkhasian v Home Builders BOP Ltd DC Tauranga CIV-2017-070-1030, 23 October 2019[District Court decision].2 NZ Brick Distributors Ltd Partnership v Malkhasian [2020] NZHC 2147 [High Court decision].3 Senior Courts Act 2016, s 60(1).4 Section 60(2).5 Malkhasian v NZ Brick Distributors Ltd Partnership HC Tauranga CIV-2019-470-119, 15December 2020 (Minute of Brewer J).6 Waller v Hider [1998] 1 NZLR 412 (CA) at 413.non-party, notwithstanding that the non-party had itself assessed thereasonable costs of compliance at $1,192.The case in the lower courts[5] The order for non-party discovery related to the supply of bricks by NZBD, thevalue of which was about $16,000. Mr and Mrs Malkhasian agreed to pay NZBD'sreasonable costs in complying with the order, which NZDB estimated at $1,192.[6] NZBD failed to comply with the order, largely because it took the view that itshould only have to discover documents that it considered relevant. Four casemanagement conferences were required to enforce compliance. Ultimately, 34documents were discovered. NZBD sought an order for its costs of $26,459.60. Theexercise had cost Mr and Mrs Malkhasian just over $14,000. The District Court Judgeconsidered that NZBD had taken an "unnecessarily obstructive and adversarialapproach to what was a straight forward issue"7 and that its conduct disentitled it tocosts.8 Instead, he awarded costs to Mr and Mrs Malkhasian of $7,500.[7] NZBD appealed. Brewer J described the approach taken by NZBD as"unreasonably pedantic" but falling short of conduct that would make it in the interestsof justice for it to forfeit its right to costs and become liable to contribute to Mr andMrs Malkhasian's costs.9 He thought that such conduct would include deliberateobstruction for a partisan purpose and egregious failure to comply with Court orders.10The Judge assessed reasonable costs at $10,000.11 He quashed the District Court'sdecision and made an order for that amount in favour of NZBD.Application for leave[8] The approach taken to costs on non-party discovery is accepted as being thatdescribed by McGechan J in Clear Communications Ltd v Telecom Corporation of NZLtd.12 In summary, such costs are determined in two stages — first, as to costs on the7 District Court decision, above n 1, at [2].8 At [16].9 High Court decision, above n 2, at [27]–[28].10 At [27].11 At [30].12 Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC).application itself and secondly, costs of complying with the order. In the absence of agood reason to the contrary, the non-party is entitled to its actual, reasonable costs.13[9] Mr and Mrs Malkhasian say that Brewer J wrongly conflated the two stagesset out in Clear Communications and unjustifiably limited the Court's discretion bycreating a threshold of "exceptional conduct" (though the Judge did not use thisphrase) in determining whether a non-party should be entitled to its reasonable costsin the event of non-compliance with an order. There should, therefore, be anopportunity for the law to be clarified so that costs in this situation are predictable andexpeditious.[10] NZBD opposes leave, saying that there is no gap in the law, as is suggested. Itsubmits that it did comply with the order, that the orthodox position is that it is entitledto its reasonable costs and that the Court already has an overall discretion as to costs,including the discretion to refuse costs. NZBD maintains that the application simplyreflects a desire to relitigate the issues already considered by two judges.[11] There appears to be no authority addressing the approach to be taken wherethere has been non-compliance with a non-party discovery order, including whether itis open to the Court to award costs to the party seeking discovery in relation to theconduct of a non-party during the compliance stage of the discovery process, and ifso, what kind of conduct would justify that approach. Although this case involves amodest sum, we see these questions as being of wider significance and consider that afurther appeal is justified.Result[12] The application for leave to bring a further appeal is granted.Solicitors:Gallie Miles, Te Awamutu for AppellantsMinterEllisonRuddWatts, Auckland for Respondent13 At 201–202.