BUILDING BRILLIANT NZ LIMITED v STAR FIELD HOLDINGS LIMITED [2023] NZHC 1857

BUILDING BRILLIANT NZ LIMITED v STAR FIELD HOLDINGS LIMITED [2023] NZHC 1857 [18 July2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2023-404-529[2023] NZHC 1857BETWEEN BUILDING BRILLIANT NZ LIMITEDApplicantAND STAR FIELD HOLDINGS LIMITEDRespondentHearing: 15 June 2023Appearances: Sophie L L Gallagher for the ApplicantGary J Warren for the RespondentJudgment: 18 July 2023COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLORThis judgment was delivered by me on 18 July 2023 at 3:00pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Righteous Law (C L Holland/Sophie L L Gallagher), GreenLane, Auckland, for the ApplicantPCW Law, Remuera, Auckland, for the RespondentCopy for:Gary J Warren, Greenlane, Auckland, for the Respondent`[1] This matter was called before the Court on 15 June 2023. At that hearing, theapplicant's application to set aside the respondent's statutory demand was withdrawnwith leave of the Court, and costs were reserved. Each of the parties was directed tofile a memorandum as to costs within five working days of the date of the hearing, anda decision as to costs would then be made on the papers.[2] Counsel for the respondent filed a memorandum dated 21 June 2023, andcounsel for the applicant filed a memorandum in response, dated 22 June 2023.Respondent's submissions[3] Counsel for the respondent submits that the respondent should be entitled toindemnity costs for all steps in the proceedings from 4 May 2023 onwards on the basisthat:(a) the applicant's proceeding to set aside the statutory demand are flawedand an abuse of process;(b) the applicant disputed the amount claimed, and sought to exploit it;(c) the applicant, by way of a Part 14 compromise, has subsequentlyconfirmed the amount claimed in the statutory demand is undisputed;(d) the applicant has taken steps to repay the amount demanded;(e) it has always been open to the applicant to discontinue the proceedingssince 4 May 2023;(f) an order for indemnity costs for the steps taken since 4 May 2023 meetsthe interests of justice.[4] Mr Warren submits that the respondent should be entitled to indemnity costsfrom 4 May 2023 onwards as the applicant continued the proceedings after the formalcompromise agreement was reached on 3 May 2023 and failed to inform the Court ofthe agreed compromise, or file a notice of discontinuance. He submits the statutorydemand was not an abuse of process as it was issued for a liquidated sum that wasunchallenged by the applicant and was issued in good faith. As the applicant withdrewthe application to set aside the statutory demand, the respondent was not unsuccessfulin the proceedings.[5] Mr Warren refers to the decision in Nags Head Horse Hotel Ltd v Epsom WoodsLtd1 which he submits was an example of a case where there are indications thestatutory demand was not issued for a proper purpose, there was an underlying flawin the respondent's opposition to the setting aside of the statutory demand, and therespondent's position changed during the proceedings, resulting in the Court orderingthat indemnity costs should be paid. Mr Warren submits there are similarities betweenthe present case and the Nags Head case in that there is a serious doubt that theapplication to set aside the statutory demand was made for a proper purpose and therewas an underlying flaw in the applicant's position, sufficient enough for it to changeits position during the course of the proceedings. He submits the application wentfrom seeking to set aside the statutory demand, to a position where it was agreed thestatutory demand was undisputed and due, and taking steps to reach a compromisewith the respondent.[6] Mr Warren further submits that the applicant has demonstrated that thestatutory demand was for a liquidated undisputed sum by the compromise arrangementagreeing to pay $75,000 in cash and signing a General Security Agreement over theapplicant's present and future goods to secure the remainder of the demanded amount.[7] Mr Warren also submits that indemnity costs are claimed on the grounds that:(a) the applicant acted vexatiously, unnecessarily and improperly incontinuing a step in the proceeding;1 Nags Head Horse Hotel Ltd v Epsom Woods Ltd [2020] NZHC 2973.](b) clause 28 of the Master Builder's contract allows recovery of fullsolicitors/client costs.[8] The respondent therefore seeks indemnity costs, or alternatively costs on a 2Bscale with a 25 per cent uplift. The respondent also seeks an order that the amount of$143,228.50 (being the amount listed in the General Security document), be declaredas a liquidated sum due and owing under the contract.Applicant's submissions[9] Ms Holland, for the applicant, submits that costs should lie where they fall.Ms Holland submits that the applicant has not acted vexatiously, unnecessarily orimproperly in continuing the step in the proceedings.[10] As to the settlement agreed between the parties, Ms Holland submits that:(a) while a settlement meeting occurred on 3 May 2023 when there weresettlement discussions between the parties, a full and final settlementagreement was not entered into and it was only the intentions of theparties were agreed upon and recorded in an email. The respondent hadnot withdrawn its statutory demand after those settlement discussions;(b) there was no finality to the settlement in early May 2023 as the finalityof the settlement rested on the condition of the deed of acknowledgmentbeing drafted and signed. The deed of acknowledgment was providedby the respondent to counsel for the applicant on 4 May 2023 but wasnot signed. Ms Holland therefore submits that the parties could nothave understood the terms of the agreement on 3 May 2023 to be a fulland final settlement;(c) there may have been some miscommunication or confusion, but it doesnot lead to the conclusion of ill-intention from either side nor anydeliberate actions to abuse the process, act vexatiously, unnecessarilyor improperly in continuing the step in the proceedings;(d) against such a background, it would be inappropriate and not in theapplicant's best interests to withdraw the application withoutinstructions based on the parties' intention to enter into the terms of theagreement on 3 May 2023.[11] As to the respondent's contention that indemnity costs are recoverable undercl 128 of the Building Contract, Ms Holland submits that cl 128 is not applicable inthe current situation as the current proceedings were focused on setting aside astatutory demand and the invoices as being in dispute. She submits that the currentproceeding was not one of costs recovery that is due and payable, rather, it was issuedas one of the disputed invoices and the amount not due and payable.Decision[12] In my view there are issues on both sides of this matter. The following factorsneed to be balanced:(a) The amount claimed in the statutory demand has ultimately beenacknowledged by the applicant to be an undisputed amount asevidenced in the settlement agreement.(b) The respondent did not file a notice of opposition to the applicationdespite being granted an extension of time to do so to 28 April 2023,and did not appear when the matter was called before the Court on28 April 2023.(c) There was a lack of clarity around when the full and final settlementarrangement was agreed between the parties. Ms Holland points to thefact that there was a deed of acknowledgment was prepared and sent tothe applicant's counsel on 4 May 2023, but not signed. However, atsome point in early May 2023 the applicant made a payment to therespondent pursuant to the settlement arrangement, and also enteredinto the General Security Agreement to secure the balance of theamount outstanding. These steps indicate that under the doctrine ofpart-performance, that the settlement agreement was effectively inplace, notwithstanding the deed of acknowledgment was not signed.(d) I accept Ms Holland's submission that cl 128 of the Building Contractis not applicable to entitle the respondent to indemnity costs.[13] While Mr Warren has relied on the Nags Head decision2 as a basis on whichthe Court should award indemnity costs against the applicant, I am of the view that theapplicant's actions in seeking to set aside the statutory demand and continuing to takesteps in the proceeding after the 3 May 2023 settlement discussions are not sufficientlyunreasonable, vexatious or unnecessary to warrant awarding indemnity costs, orindeed any costs, against the applicant.[14] Weighing up the factors set out at paragraph [12], I am of the view that costsshould lie where the fall.[15] With respect to the orders sought by the respondent, that the amount of$143,228.50 (being the amount stated as secured by the General Security Agreementexecuted by the applicant) be declared as a liquidated sum due and owing under thecontract, this order is not made, as it is not appropriate for such declaration being madein these proceedings and is a matter to be left to the settlement agreement between theparties.Orders[16] I order that the parties' costs lie where they fall...Associate Judge Taylor2 Above, n 1.