CAZNA AVENUE NOMINEES LIMITED v THE UNIVERSITY OF AUCKLAND [2014] NZHC 837

CAZNA AVENUE NOMINEES LIMITED v THE UNIVERSITY OF AUCKLAND [2014] NZHC 837 [28 April 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2012-404-005209[2014] NZHC 837BETWEEN CAZNA AVENUE NOMINEESLIMITEDPlaintiffAND THE UNIVERSITY OF AUCKLANDDefendantHearing: On the papers.Counsel: R J Hollyman and A J Holmes for PlaintiffD J Neutze and J Jeffries for DefendantJudgment: 28 April 2014JUDGMENT OF ANDREWS J[Correction of judgment; costs]This judgment is delivered by me on 28 April 2014 at 3.30pmpursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarSolicitors:Knight Coldicutt, AucklandBrookfields, AucklandIntroduction[1] On 27 February 2014, I delivered judgment on Cazna's claim against theUniversity for damages for breach of a lease agreement.1 The judgment has not yet been sealed.[2] Two matters now require consideration:(a) whether I should correct the award of interest; and(b) costs.Counsel for the parties have submitted memoranda dealing with both issues. An oral hearing has not been sought.Interest[3] At [86] of the judgment I held:The University is ordered to pay Cazna reinstatement costs of $333,379, together with interest pursuant to s 98 of the Judicature Act at 5 per cent per annum from 7 September 2009.[4] On behalf of Cazna, Mr Hollyman has pointed out that the prescribed rate for interest under the Judicature Act between 7 September 2009 and 30 June 2011 was 8 per cent, and that the rate changed to 5 per cent as from 1 July 2011. The difference in the award of interest, if interest is calculated at 8 per cent between 7 September 2009 and 30 June 2011, is approximately $20,481. He suggested that my reference to 5 per cent, only, was a slip. He seeks correction of the slip.[5] Mr Neutze submitted on behalf of the University that the judgment does not indicate that the award at 5 per cent was a slip; rather, he submitted, the award at 5 per cent was an intentional exercise of the Court's discretion as to costs.1 Cazna Avenue Nominees Ltd v The University of Auckland [2014] NZHC 303.[6] Rule 11.10 of the High Court Rules provides that a judgment may becorrected if it "contains a clerical mistake or an error arising from an accidental slipor omission".[7] I accept that the judgment should be corrected. Had I intended to exercise my discretion as to costs, to award a rate different from that prescribed under the Judicature Act 1908 at any particular time, I would have given my reasons of doing so. In this case, I intended that the prescribed rate should apply. Specifically, I did not intend that 5 per cent should apply for the entire period, if that were not the prescribed rate. My not making this clear was an accidental slip.[8] Accordingly, [83] of the judgment is corrected to read:The University is ordered to pay Cazna reinstatement costs of $333,379, together with interest from 7 September 2009 at the rate prescribed pursuant to s 89 of the Judicature Act from time to time.Costs[9] Cazna seeks full solicitor and client (indemnity) costs or, in the alternative, scale costs on a 2B basis, together with disbursements.Indemnity costs[10] Mr Hollyman submitted that the University is required to pay indemnity costspursuant to clause 6 of the University's lease:THE Tenant shall pay the Landlord's legal costs (as between solicitor andclient) of and incidental to the enforcement or attempted enforcement of theLandlord's rights remedies and powers under this lease.[11] Mr Hollyman submitted that it was held in the judgment that:(a) There as an absolute transfer from New Bay to Cazna of the reinstatement obligations under the lease once the sale agreement became unconditional on 31 October 2006 (at [29] and [33]); and(b) Cazna had the same ability that New Bay had to enforce the reinstatement obligations, and had standing to bring proceedings toenforce the reinstatement obligations under the lease (at [25] and [34]).[12] Mr Hollyman submitted that in finding that there had been an effectiveassignment of the University's reinstatement obligations under clause 15 of the saleagreement between New Bay and Cazna, there was an effective assignment of any other termination issues arising under the University lease. On that basis, he sought full solicitor and client legal costs in respect of enforcement of the reinstatementobligations. Cazna's costs claim is for a total of $209,846.50, together with disbursements of facts $47,250.97.[13] Mr Neutze submitted that there is no basis on which Cazna is entitled to indemnity costs. He noted that clause 6 of the lease applied to the landlord and the University, as the two parties to the lease. He referred to [82] of the judgment, in which I held:Mr Hollyman submitted that default interest should be award in this case. He referred to the judgment of Panckhurst J in Jansen Limited v Petra Holdings Limited, in which his Honour dismissed an appeal against an award of default interest on a claim for reinstatement costs. However, I accept Mr Neutze's submission that Cazna cannot claim default interest, as Cazna never became the "Landlord" under the lease and (in contrast to thereinstatement obligations) the right to claim default interest was not assigned to Cazna.(footnote omitted)Mr Neutze further noted that at [51] I held that: Cazna could not permit the University to hold over (because the sale agreement assigned only the reinstatement obligations) [14] Mr Neutze submitted that the landlord's right to claim indemnity costs, like the landlord's right to claim default interest, and the landlord's right to allow thetenant to hold over, had not been assigned to Cazna, so Cazna has no entitlement to claim indemnity costs under the lease.[15] Although Cazna's statement of claim included (at para (c) of the reliefclaimed under each cause of action) a claim for "solicitor and client costs inaccordance with the Deed of Lease (to be quantified prior to trial) or as awarded bythe Court", neither party addressed the claim at trial, or in submissions filed after thehearing. This may be contrasted with Cazna's claim for default interest under thelease (para (b) of the relief claimed) which was addressed, and ruled on in the judgment. The principal focus of the trial was whether the reinstatement obligationshad been assigned to Cazna and, if so, whether the University had breached them.[16] Having reviewed the parties' submissions and the judgment, I have concludedthat Cazna cannot claim indemnity costs. I accept Mr Neutze's submission that as Cazna never became the "Landlord" under the lease, and the right to claim indemnitycosts was not assigned to Cazna, it cannot now claim solicitor and client costs.[17] Accordingly, Cazna's claim for indemnity costs must fail.Scale costs[18] In the alternative, Cazna claimed scale costs on a 2B basis, together with disbursements.[19] Cazna's claim for scale costs was for $47.681.10. Mr Hollyman noted that an allowance of 0.4 days was sought for providing further particulars, an allowance of 0.6 days was sought for amending its statement of claim to incorporate particulars, an allowance for second counsel at trial was sought, an allowance of 1.5 days was sought for preparing closing submissions presented after trial, and a further allowance of 0.6 days was sought for preparing a memorandum in response to theUniversity's application to amend its statement of defence of closing.[20] Mr Neutze challenged some of the additional items claimed by Cazna. He also sought a reduction from the scale costs on account of Cazna having failed in its first cause of action, in which it claimed $880,000 for diminution in value. He submitted that scale costs should be reduced by 33 per cent on this basis. Mr Neutze submitted that the proper award of scale costs is $44,775 (which, he submitted, should be reduced by 33 per cent).[21] Mr Neutze cited the Court of Appeal's judgment in Packing In Ltd (In Liquidation) v Chilcott as setting out the correct approach to costs where a party has succeeded only partially:2In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded. Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters that can reasonablybe said to bear on the Court's ultimate discretion on the subject of costs. Inthe end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case. Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.[22] Mr Neutze also referred me to the judgment of Katz J in Clearwater Cove Apartments Body Corporate No 170989 v Auckland Council, in which her Honour reduced scale costs otherwise payable by the Body Corporate (which had beenlargely, but not entirely, unsuccessful) by 15 per cent on the basis of a "realisticappraisal of the end result".3[23] In this case, the issue of "diminution in value" or "reinstatement costs"related to the measure of damages. As reflected in the judgment, the primary issues were whether Cazna had standing to claim against the University (that is, whether the reinstatement obligations under the University's lease had been assigned toCazna), then whether the University had breached those obligations. On the primary issues, Cazna succeeded and the University failed.[24] I accept that some reduction in costs is appropriate to reflect the fact thatCazna's claim that the appropriate measure of damages was diminution of value($880,000) did not succeed, while its alternative claim for damages for reinstatement costs ($333,379) succeeded. However, I am not persuaded that the reduction should be as great as 33 per cent.2 Packing in Ltd (In Liquidation) v Chilcott (2003) 16 PRNZ 869 at [5]–[6].3 Clearwater Cove Apartments Body Corporate No 170989 v Auckland Council [2014] NZHC 467 at [14].[25] As did Katz J, I have looked at the matter in the round on a realistic appraisal of the proceeding and the parties' success and failure. I have concluded that theUniversity should meet 80 per cent of Cazna's scale costs.[26] I turn now to Mr Neutze's challenges to individual items claimed by Cazna.These were its claim for allowances for responding to requests for particulars, for the amended statement of claim, and for its memorandum in opposition to theUniversity's application to amend its statement of defence after closing. I do notaccept that any of these have been improperly claimed. They all relate to steps taken in the proceeding.[27] Accordingly, the University is to pay scale costs of $38,367.20 (that is, 80 per cent of $47,959).Disbursements[28] Cazna's claim for disbursements totalled $47,250.97 (comprising $3,441.12 claimed on a GST exclusive basis and $43,809.97 claimed on a GST inclusive basis).4 The disbursements included payments to expert witnesses. Mr Neutze challenged individual disbursements on a number or bases. He submitted that the proper amount payable was $22,286.42, following deduction of disbursements he submitted should be disallowed.[29] First, Mr Neutze challenged a disbursement of $3,300 paid to Rider Hunt in November 2006, on the basis that it was not a disbursement paid or incurred for the purpose of the proceeding, as it had been prepared some six years before the proceeding was commenced, and as part of an attempt to negotiate with theUniversity prior to the expiry of the lease. I do not accept Mr Neutze's submission.The Rider Hunt report played a significant part in the hearing, as it was a contemporaneous report as to the state of the premises as the time Cazna becameowner of the property and the University's lease was terminated. I accept that it isproperly claimed as a disbursement in the litigation.4 Reflecting the fact that up to 31 March 2010, Cazna had claimed GST input credits, but thereafter it had not.[30] Mr Neutze challenged three invoices (totalling $141.12) from Cazna's formersolicitors, Rogers & Rutherford, in June, July and August 2007. Again, the challenge was on the basis that they were not disbursements paid or incurred for theproceeding. I accept Mr Neutze's submission in respect of these payments. They are disallowed.[31] Next, Mr Neutze challenged payments to Seagar & Partners, totalling$14,030, on the basis that they related solely to Cazna's claim for diminution invalue. He submitted that these should be disallowed, completely. I do not accept that this claim should be dismissed in its entirety. I have concluded that it isappropriate that the University meets 50 per cent of the Seagar & Partners' costs, thatis, $7,015.[32] Mr Neutze has not included the setting down fee of $3,141.80 in his schedule of accepted disbursements. No reason is given for its exclusion, and I can see no basis on which this should be excluded. Clearly, Cazna is entitled to claim it as a disbursement.[33] Finally, Mr Neutze submitted that Cazna should be allowed only 50 per centof its claim for "photocopying/couriers/office expenses" of $8,703.25. His challengewas on the basis that while some of the disbursements would be recoverable (for example photocopying the bundle of documents for the hearing) others would not (for example, expenses claimed before the proceedings were commenced, general office photocopying and office overheads). He submitted that there has been no adequate breakdown provided, so the entire claim could be disallowed, or a deduction of 50 per cent could be made to reflect the failure of the diminution in value claim and lack of supporting detail for the disbursements.[34] There is force in Mr Neutze's submission as to the lack of detail. As he submitted, it is not possible to discern what was paid in respect of any of the elements of this claim. I accept his submission that a reduction of 50 per cent is warranted. I have concluded that the University should meet 50 per cent of Cazna'sclaim for photocopying and other expenses (that is, $4,351.63).Conclusion as to costs and disbursements[35] The University is ordered to pay Cazna scale costs in the sum of $38,367.20.[36] The University is ordered to pay Cazna disbursements totalling $35,743.23, comprising:________________________Andrews J(a) Rider Hunt $3,300.00(b) Seagar & Partners $7,015.00(c) Rider Levett Bucknall $10,212.00(d) Filing fee $1,329.20(e) Setting down fee $3,141.80(f) Filing fee (amended pleading) $110.00(f) Hearing fee $6,283.60(g) Photocopying/couriers/office expenses $4,351.63TOTAL $35,743.23