CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [Costs] [2023] NZHC 3038

CHRISTIAN CHURCH COMMUNITY TRUST AND OTHERS v BANK OF NEW ZEALAND [Costs] [2023]NZHC 3038 [31 October 2023]IN THE HIGH COURT OF NEW ZEALANDGREYMOUTH REGISTRYI TE KŌTI MATUA O AOTEAROAMĀWHERA ROHECIV-2022-418-16[2023] NZHC 3038UNDER The High Court Rules 2016IN THE MATTER OF An interlocutory application for interiminjunctionBETWEEN THE CHRISTIAN CHURCHCOMMUNITY TRUST AND OTHERSApplicantsAND BANK OF NEW ZEALANDRespondentHearing: 30 May 2023Appearances: R W Raymond KC, A V Foote and C M G Sykes for ApplicantsW M Irving and L M Dick for RespondentJudgment on Costs: 31 October 2023JUDGMENT OF CULL J[On Costs]Introduction[1] By judgment dated 8 September I upheld the applicants' application for thecontinuation of an interim injunction preventing the respondent from terminating thebank accounts of the applicants' entities pending the final determination at asubstantive hearing.1 I found that there was a serious question to be tried on theapplicants' first cause of action, as to whether BNZ acted in breach of its contract withthe applicants when they sought to unilaterally terminate the contract on reasonable1 Christian Church Community Trust v Bank of New Zealand [2023] NZHC 2523.notice. I held that it is seriously arguable that BNZ does not have an express unilateralpower of termination, and that either the default rule,2 or the Braganza extensionapplies,3 requiring the respondent not to exercise its contractual discretion in a waythat is arbitrary, capricious, or that there is an implied term in the contract to actreasonably. If the respondent is required to act reasonably, there is a serious issue asto whether BNZ's termination decision was reasonable, procedurally, and/orsubstantively, and whether there is a public obligation on the respondent as an essentialservice provider to provide minimum banking services to customers withoutalternative options. The balance of convenience and overall justice of the case, in myview, clearly favoured the applicants.[2] The parties were unable to agree on costs and memoranda have been filed.The parties' positions[3] The applicants seek costs plus disbursements, calculated on a 2C basis for stepstaken up to 1 May 2023, and indemnity costs from 1 May 2023 being the date theapplicants wrote to the respondent proposing a settlement discussion.[4] The respondent is prepared to accept that the applicant is entitled to costs on a2C basis, subject to some minor amendments to the applicants' cost schedule, withwhich I deal below. The respondent submits that indemnity costs are not warranted asthe respondent cannot be regarded as having acted vexatiously, frivolously, improperlyin opposing the application for the interim injunction, preventing its ability to closethe accounts.[5] I deal with the disputed steps and the claim for indemnity costs in turn.2 The common law principles applying to an exercise of a contractual discretion, which requiresthat it may not be exercised in a way that is arbitrary, capricious, or unreasonable having regardto the provisions of the contract. See Canaan Farming Dairy Ltd v Westland Dairy Company Ltd[2022] NZHC 2524 at [115]—[122] recently considered in Woolley v Fonterra Co-operativeGroup [2023] NZCA 266.3 Braganza v BP Shipping Ltd and another [2015] UKSC 17, [2015] 1 WLR 1661, neither expresslyendorsed or rejected in Woolley v Fonterra Co-operative Group Ltd, above n 2, at [103] and [112]–[115].Disputed steps[6] The respondent disputes two aspects of the applicant's costs schedule.[7] First, the applicants claim for one day for second and subsequent counsel ifallowed by the Court. The respondent is prepared to accept costs for both principaland second counsel, but states that the appropriate allocation for second counsel is50% of the allocation for principal counsel, in accordance with step 27 of sch 3 to theHigh Court Rules 2016. I uphold the respondent's submission, that there is noapparent justification for departing from this rule. The time allocation for secondcounsel should be 0.5 days.[8] Second, the respondent submits that the provision for step 12, appearance at amentions hearing, in respect of the interlocutory application should be removed. Theapplication before Dunningham J on 29 November 2022 was without notice, althoughserved on a Pickwick basis. Counsel were still required to attend and address the needfor the application and its urgency. Costs are appropriate in that circumstance.Indemnity costs[9] The applicants seek indemnity costs from 1 May 2023 under r 14.6 of theRules, primarily on the grounds that the applicants wrote to the respondent on 1 May2023 proposing settlement discussions. They say their offer was improperly rejectedby BNZ. The applicants contend that r 14.10 is engaged, which relates to Calderbankoffers.[10] The applicants also contend that BNZ's conduct put the applicants tounnecessary cost in the proceeding, by:(a) Relying on erroneous material in making its decision to close theapplicants' accounts, including a Wikipedia entry;(b) Declining to reconsider its position even on receipt of the applicants'evidence;(c) Declining to provide the decision making material to the applicantsuntil after the application had been filed –– a substantial affidavit inresponse, dealing with each factual inaccuracy had to be filed; and(d) Refusing to extend the closure date on 23 November 2022, andunreasonably refusing a request by the applicants on 28 November2022 that they be given until 2 December 2022 to file an application forrelief, putting the applicants to the additional cost of the urgentapplication before Dunningham J on 29 November 2022.[11] BNZ submits that the applicants merely requested a meeting to discuss aresolution to the substantive proceeding in their letter of 1 May 2023, and at no stagemade any offer that would fall within r 14.10. The written communication was notmarked "without prejudice save as to costs" as required by r 14.10(1)(a) and it did notput forward any offer to resolve the interlocutory application. Further, BNZ says theapplicants have not shown that it was unreasonable for the respondent to reject theiroffer to commence settlement discussions, so as to fall within r 14.6(3)(b)(v).[12] It appears the applicants requested a meeting in relation to the resolution of thesubstantive proceeding not a proposal to resolve the interlocutory application. BNZsuggests as the applicants did not propose an interlocutory resolution, for example, inexchange for an agreement that the substantive proceeding move quickly towards trial,the applicants' offer is irrelevant to the Court's determination of costs on the interiminjunction.[13] Costs are ultimately at the discretion of the Court.4 As a number of recentjudgments of this Court have addressed, it is becoming increasingly common forparties to litigation to seek an uplift of the standard scale costs.5 Such uplifts are onlywarranted when there is a clear basis for such a departure and should otherwise bediscouraged. The costs regime should be "predictable and expeditious"6, thus, the4 High Court Rules 2016, r 14.8; guiding principles contained in r 14.2 — these principles apply toboth substantive proceedings and interlocutory applications.5 Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [7]; Spring v Browne[2023] NZHC 2581 at [7]-[8]; Lepionka & Company Investments v Sheat [2023] NZHC 2745 at[3] and [7].6 Rule 14.2.(1)(g).standard scale for costs provided for in the High Court Rules 2016 applies by default.7The Court should only be involved in determining costs in limited circumstances – notthe majority of cases or in the usual course.8[14] A departure from scale costs to award indemnity costs, should only occur intruly exceptional circumstances.9 Rule 14.6(4) sets out such circumstances which mayjustify an award of indemnity costs, illustrating the high threshold, such as where aparty has acted vexatiously, frivolously, improperly, or unnecessarily in commencing,continuing, or defending a proceeding or a step in a proceeding.10[15] As I have held, these proceedings involve a serious question to be tried. Iconsider that it was not improper or unnecessary for the BNZ to maintain its positionin respect of the interim injunction. It did not do so, for example, in wilful disregardof known facts or clearly established law, nor were its principal arguments in defencewithout merit.11 There is a serious issue as to the law applicable to the circumstances,namely whether or not the common law principle that BNZ was entitled to exercise itscontractual discretion in the way it did, or whether the common law default rule, orthe Braganza extension applied in the circumstances.[16] In relation to the allegations about the BNZ submissions, the reliability of thefactual foundation for the BNZ's decision remains to be tested at a substantive hearing.The BNZ's refusal to accommodate the applicants' request and the need for the interiminjunction underplay the serious questions to be tried. Whether the BNZ's positionwas reasonable, fair or tenable, remains to be determined. It does not justify indemnitycosts.[17] The applicants have not discharged their onus to persuade the Court that anaward of indemnity costs is justified.7 See Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]—[48] for a summary onthe schedular approach to costs.8 Lepionka & Company Investments v Sheat, above n 5, at [7].9 Hedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 at [8].10 Rule 14.6(4)(a).11 Rule 14.6(3)(b)(ii), see for example, Powell v Hally Labels Ltd [2015] NZCA 11 at [4]-[5].Result[18] The applicants are awarded costs in accordance with the above, on a 2C basis,being $18,903 (inclusive of disbursements).Cull JSolicitors:Duncan Cotterill, Christchurch, for ApplicantsRussell McVeagh, Auckland, for Respondents