COUSINS & ASSOCIATES V FM CUSTODIANS LIMITED COA CA777/2011

COUSINS & ASSOCIATES V FM CUSTODIANS LIMITED COA CA777/2011 [11 April 2013]IN THE COURT OF APPEAL OF NEW ZEALANDCA777/2011[2013] NZCA 99BETWEEN COUSINS & ASSOCIATESAppellantAND FM CUSTODIANS LIMITEDRespondentHearing: 13 March 2013Court: O'Regan P, Arnold and Miller JJCounsel: A C Hughes-Johnson QC for AppellantJ E Bayley for RespondentJudgment: 11 April 2013 at 11.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs on a band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by O'Regan P)Introduction[1] This is an appeal against a judgment of Whata J awarding costs against the appellant, Cousins & Associates (Cousins), in favour of the respondent, FM Custodians Limited (FMC).1Issue[2] The issue on appeal is not the amount of costs awarded, but whether it was appropriate for the Judge to award costs in circumstances where issues relating to liability have been resolved but the quantum of damages remains to be determined. Cousins argued in the High Court that costs should not have been awarded until after all of the issues in dispute between the parties, including damages, were decided. In the alternative, it argued that, if costs were to be awarded prior to the determination of damages, the order for costs ought to have been stayed until after the determination of the quantum of damages. Both of those arguments failed in the High Court and are now renewed in this Court.[3] Before turning to those arguments, we briefly set out the factual background.Facts[4] FMC is a custodian trustee through which investors in mortgages hold their investments. FMC agreed to make a loan to Lichfield Ventures Limited (Lichfield) which was to be secured by a first mortgage over a Christchurch property. The property was all of the land described in one certificate of title and part of the land described in another. FMC instructed Cousins, a firm of solicitors which acted for Lichfield, to attend to the preparation, execution and registration of the mortgage. The mortgage was not registered pending the amalgamation of the two parcels of land into one title, but Cousins undertook that all was in place to effect the amalgamation and that there was no impediment to its proceeding.1 FM Custodians Ltd v Cousins & Associates HC Christchurch CIV-2009-409-2728, 26 October2011.[5] FMC alleged that Cousins did not act in accordance with its instructions when registering security documents in that Cousins failed to register a first mortgage over a particular title owned by Lichfield, which was part of the mortgaged land.[6] FMC alleged negligence on the part of Cousins and the suffering of loss. The claim is defended by Cousins.[7] A liability trial was ordered. But on 8 July 2011, just over two weeks before the liability trial was to commence, Cousins admitted liability. This admission came after most of the normal steps required to prepare a case for trial had taken place. The parties submitted a joint memorandum noting their agreement on issues ofliability. The memorandum, recorded Cousins' position in these terms:a. [Cousins] admits liability on [FMC]'s claim on the basis it does not prejudice its right to argue.i. That [FMC] waived its right to seek compensation from [Cousins] by taking no steps to resolve the situation when it first became aware of it (which [Cousins] maintains was in 2007, but which [FMC] denies);ii. That [Cousins] is not responsible for any loss caused to[FMC] by virtue of [FMC]'s failure to mitigate the situation and by [FMC]'s actions in entering into the deed ofarrangement with Lichfield Ventures Limited in October 2009; andiii. [FMC] has not suffered any loss caused by [Cousins].[8] Another provision of the joint memorandum dealt with costs. It said:d. If [FMC] wishes to seek costs against [Cousins] it may do so by filing a Memorandum within 10 working days.[9] FMC did seek costs against Cousins in relation to the aborted liability trial. This opposed application was dealt with by Whata J on 26 October 2011 who ordered costs on the liability trial. He noted in his decision that an earlier admission of liability would have avoided the costs incurred in preparing for the liability trial.Should costs have been deferred?[10] Counsel for Cousins, Mr Hughes-Johnson QC, accepted that decisions relating to costs were discretionary and that the appellate restraint applying to discretionary decisions applied.2 But he argued that costs decisions must still be principled and that this Court should intervene in this case because the decision to award costs was contrary to principle.[11] The essence of the case for Cousins is that it is possible that it will succeed at the quantum trial in establishing a failure by FMC to mitigate its loss and that FMC will receive no damages or only minimal damages. Looked at in the round, thatwould mean that Cousins will have succeeded in resisting FMC's claim and therefore should not have to pay costs. Mr Hughes-Johnson said the Judge ought to have awaited the outcome of the quantum trial to see if this happened, in which case an award of costs against Cousins would be inappropriate or else only a small award should be made.[12] Mr Hughes-Johnson argued that the principle embodied in r 14.2(a) of the High Court Rules that a party who fails in respect to a proceeding should pay costs to the successful party meant that costs should be awarded only when the outcome of the entire proceeding is known. However, he acknowledged that there had to be exceptions for cases where it was obvious that a large award of costs against the liable party was likely or where wasted costs are justified. We do not see r 14.2(a) as requiring a fixed approach to decisions as to whether to award costs before quantum is decided. The exceptions acknowledged by Mr Hughes-Johnson exemplify this.[13] In any event, the term "proceeding" used in r 14.2(a) is coloured by thegeneral rule in r 14.1 that matters relating costs are discretionary if they related to a"proceeding" or a "step in a proceeding". Rule 14.2 is subject to r 14.1.32 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15] and,more generally in relation to appeals from the exercise of discretion, Kacem v Bashir [2010]NZSC 112, [2011] 2 NZLR 1.3 High Court Rules, r 14.1(2).[14] Mr Hughes-Johnson asked us to apply by analogy the approach mandated in the High Court Rules for summary judgment applications. While r 14.8 requires that costs on an opposed interlocutory application must be fixed when the application is determined, that rule specifically excludes summary judgment applications.4[15] Mr Hughes-Johnson cited a number of English decisions supporting his submissions. One example suffices. In Weill v Mean Fiddler Holdings Limited, Lightman J observed that if there is a split trial and there is doubt whether theplaintiff will recover more than nominal damages at the quantum trial, it "may be proper" for the trial Judge to defer making a costs order until the outcome of the quantum trial is known.5 We agree that such a course may be proper, but we do not see that as establishing a principle that must be followed in all cases.[16] In our view, another decision of the Court of Appeal of England and Wales sums up the position correctly. In Alan Williams Entertainment Ltd v Hurd, the Court referred to the Weill decision noted above and observed that that decision found that reserving costs until after a quantum trial was a permissible but not the only way of dealing with costs.6 The Court in Williams said the trial Judge might properly have reserved the costs of the hearing before him to the Judge hearing the inquiry as to damages in due course but was unable to see any principle the trial Judge had failed to observe in not doing so. Mr Hughes-Johnson tried to distinguishWilliams on the basis that the case management rules applying to that case differed from those applying to the present case. We do not accept that this undermines the applicability of Williams to the present appeal.[17] We see the decision of Whata J in this case in the same light. Another Judge may have been prepared to reserve costs. But there was no principle requiring this. The Judge was entitled to view with concern the wasted effort by the parties and the Court that had arisen from the late admission of liability as a relevant factor. We agree with counsel for FMC, Mr Bayley, that this wasted effort would be still be a relevant factor in the assessment of costs if Cousins was entirely successful at the4 High Court Rules, r 14.8(3).5 Weill v Mean Fiddler Holdings Limited [2003] EWCA Civ 1058 at [33].6 Alan Williams Entertainment Ltd v Hurd [2006] EWCA Civ 1637 at [37]–[39].quantum hearing. We do not see any error in the Judge's decision and no basis forthis Court to interfere with his exercise of discretion.Should the costs award be deferred?[18] Having determined that there is no basis to interfere with the award of costs, we can see no basis to effectively negative its practical impact by staying it. We decline to do so.Result and costs[19] For these reasons, the appeal is dismissed. The appellant must pay the respondent costs on a band A basis and usual disbursements.Solicitors:Layburn Hodgins Limited, Christchurch for AppellantRhodes & Co, Christchurch for Respondent