HOBSON VIEWS LIMITED v HAYWARD [2020] NZHC 395

HOBSON VIEWS LIMITED v HAYWARD [2020] NZHC 395 [6 March 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-2181[2020] NZHC 395BETWEEN HOBSON VIEWS LIMITEDApplicantAND OWEN EYRE HAYWARD AND MARYJANE HAYWARDRespondentsHearing: (on the papers)Judgment: 6 March 2020JUDGMENT OF POWELL J[Costs]This judgment was delivered by me on 6 March 2020 at 3.30 pm pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] Somewhat unusually, both parties seek costs following resolution of anapplication to remove a caveat pursuant to s 142 of the Land Transfer Act 2017.Although the proceedings were discontinued both parties claim victory:(a) Hobson Views Limited ("Hobson") claim costs on the basis that itsapplication was a necessary push to get Owen and Mary Jane Hayward,to remove a caveat so as to enable Hobson to refinance; whereas(b) Mr and Mrs Hayward claim costs on the basis Hobson's applicationwas unnecessary; they had an undisputed caveatable interest and werealways prepared to remove the caveat to allow the refinancing oncethey received information and answers they were seeking from Hobson.Background[2] Hobson is the registered proprietor of a leasehold estate in North Auckland("the property"). Mr and Mrs Hayward are sub-lessees of Hobson under anunregistered railway lease. Mr and Mrs Hayward have a caveat lodged over theproperty and there is no dispute that their interest is genuine and sufficient to supporta caveat.[3] In September 2019, for financial reasons, Hobson sought to re-finance theirmortgage over the property in favour of the Bank of China Limited ("the Bank").However, due to the presence of the caveat, any refinancing required the consent ofthe respondent caveators. Hobson sought Mr and Mrs Hayward's consent, butMr and Mrs Hayward were unwilling to provide it due to concerns it would bedetrimental to their interest in the property.[4] On 16 September 2019, Mr and Mrs Hayward sought to obtain a copy ofHobson's financial records but Hobson informed Mr and Mrs Hayward this was notan appropriate request and declined to provide the information. Similarly, on20 September, Mr and Mrs Hayward asked to sight the mortgage documents but againHobson informed Mr and Mrs Hayward that this was an inappropriate request.[5] On 23 September, consent had still not been provided and counsel for Hobsoninformed Mr and Mrs Hayward that High Court proceedings would be initiated if theycontinued to withhold their consent.[6] On 24 September, Mr and Mrs Hayward wrote to Hobson seeking an"insurance" from the Bank that it recognised their lease and that the lessee's positionwould be protected in the event of default by the mortgagor. Mr and Mrs Haywardalso sought to view the loan terms if "commercial reality" would allow it. Hobsonresponded by informing Mr and Mrs Hayward that s 145 of the Land Transfer Act2017 applied and provided for the ongoing protection of the rights of the caveators.[7] On 26 September, counsel for Mr and Mrs Hayward wrote to Hobson advisingthat Mr and Mrs Hayward were prepared to sign the consent form on receipt ofconfirmation from the Bank acknowledging the respondent's unregistered interest.[8] On 14 October 2019, the application to remove the caveat was filed by Hobsonand on 16 October, counsel for the Bank informed Mr and Mrs Hayward that if theywere to take any action under the mortgage it would be subject to the terms of Mr andMrs Hayward's lease.[9] Following this statement from the Bank Mr and Mrs Hayward consented to therefinancing.[10] On 18 October 2019, the application for removal of the caveat was withdrawn.Hobson's claim for costs[11] Mr Thompson, for Hobson, contends Hobson is entitled to costs. He says thatdespite the fact the substantive application was not determined by the Court, Hobsonought to be considered the successful party as Mr and Mrs Hayward's consent to therefinancing was a direct response to the application for removal of the caveat. He alsosays that had the Court been required to decide the application it probably would havedecided in favour of Hobson as it was entirely unreasonable for Mr and Mrs Haywardto withhold their consent. In these circumstances, Mr Thompson says Hobson isentitled to indemnity costs. In the event the Court is unwilling to award indemnitycosts Hobson seeks costs on a 2B basis with a 50 per cent uplift.Mr and Mrs Hayward's claim for costs[12] Mr Webb, for Mr and Mrs Hayward, seeks costs on the basis that theapplication to remove the caveat had no prospect of success and was entirelyunnecessary as it was only filed after Hobson failed to respond to Mr andMrs Hayward's requests for an assurance from the Bank. Mr Webb denies anyallegation that Mr and Mrs Hayward delayed providing their consent, rather, hesubmits that any delay was caused by Hobson who did not provide Mr andMrs Hayward with the information requested until after the application for removalhad been filed.[13] Mr Webb notes that it is surprising Hobson has sought costs and that theorthodox position where an application is withdrawn, is that costs will follow theevent. Mr Webb submits that it is not Mr and Mrs Hayward who acted unreasonablybut Hobson, and that indemnity costs should be awarded in favour of Mr andMrs Hayward. In the alternative, Mr Webb seeks costs on a 2B basis with an uplift of50 per cent.Relevant legal principles[14] The High Court Rules 2016 provide that where a party unilaterallydiscontinues a proceeding that party must pay costs.1 This position is to reflect thatthe party has been unsuccessful. However, where, as here, the parties have filed a jointmemorandum informing the Court that the matter has been resolved, the defaultposition in r 15.23 does not apply, with standard costs rules applying instead.2[15] As a result, the fundamental principle applicable in this case is that costs shouldfollow the event,3 and therefore the loser should pay the winner's costs.4 The primacy1 Rule 15.23.2 See Ng v Pauatahanui GS Ltd [2014] NZHC 3397 where this Court declined to apply r 15.23where the proceedings were dismissed by consent order.3 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8].4 Rules 14.2 – 14.5.of this rule has been expressed by the Supreme Court in many different ways butperhaps most clearly and concisely as "the loser, and only the loser, pays".5 Thisfundamental rule, although not absolute, ought only be departed from for exceptionalreasons.6 The difficulty comes when a clear winner cannot readily be identified as isthe case where the substantive matter before the Court was not determined. Wherethis is the case the following four principles have typically been applied by the Courts:7(a) The court has power to make a costs order when the substantiveproceedings have been resolved without trial but the parties have notagreed on costs. There is no tradition of "no order as to costs" merelybecause a dispute has been settled except as to costs. That said, if itis not possible for the Judge to say what the likely outcome wouldhave been, that in itself is a possible order.(b) The overriding objective is to do justice between the parties withoutincurring unnecessary court time and consequent additional costs.(c) At each end of the spectrum will be cases where the merits and likelysuccessful party will be obvious. In between, to differing degrees,there will be cases that are less clear. How far the court will beprepared to inquire into the unresolved substantive issues will dependon the circumstances of the case.(d) In the absence of a good reason to make any other order the fall-backposition is to make no order as to costs.[16] Accordingly, the question in this case is whether the outcome concerning theapplication for the removal of Mr and Mrs Hayward's caveat can be "confidentlypredicted"8 on the papers, without an examination of the merits. If not, and theoutcome of the matter remains unclear, it will be improper and inefficient for this Courtto inquire into the unresolved substantive issues. In those circumstances costsappropriately lie where they fall.5 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].6 At [19].7 Byrne v Rose [2017] NZHC 2886 at [14] citing Ng v Pauatahanui GS Ltd [2014] NZHC 3397 at[7] – [11] where MacKenzie J referred to three English authorities: Brawley v Marczynski (No 1)[2002] EWCA Civ 756, [2003] 1 WLR 813; BCT Software Solutions Ltd v C Brewer & Sons Ltd[2003] EWCA Civ 939, [2004] FSR 150; Venture Finance Plc v Mead [2005] EWCA Civ 325,[2006] 3 Costs LR 389.8 See Ng v Pauatahanui GS Ltd [2014] NZHC 3397 at [7] where MacKenzie J outlines the positionto be as follows: where there is no determination on the substantive proceeding "it is generallyinappropriate for the parties to agree on settlement terms which require the Court to fix costs,except in cases where the outcome of the matter had proceeded to trial can be confidently predictedfrom the papers, without an examination of the merits."Discussion – could the outcome have been confidently predicted?[17] Where an application is made to remove a caveat pursuant to s 142 of the LandTransfer Act 2017, the onus will be placed on the caveator to show they have areasonably arguable case to sustain the caveat.9 If a caveator does not establish areasonably arguable case the caveat will be removed. If the caveator does establish areasonably arguable case, the caveat will be sustained unless the Court exercises itsresidual discretion to remove the caveat. This residual discretion is to be exercisedcautiously and only where the Court is completely satisfied the legitimate interests ofthe caveator will not be prejudiced.10 If, on the facts of the case, it is evident thecaveator can obtain no benefit from the maintenance of the caveat, or if the caveator'sinterests can be reasonably accommodated in some other way, then it may beappropriate the caveat be removed notwithstanding the caveator's claimed interest isbeyond dispute.11 The residual discretion to remove a caveat may also be exercisedwhere the caveator behaves in a way that is so unreasonable that they appear to beusing the caveat for a motive beyond the genuine protection of their interest in theland.12[18] In the current case it was conceded by Hobson that the respondent had alegitimate interest in the property that was capable of sustaining a caveat. Thus, if thematter had been heard, Mr and Mrs Hayward would have been able to illustrate theypossessed a reasonably arguable interest in the property. As such, it then would havefallen back on Hobson to show the Courts' residual discretion ought to be exerciseddespite the presence of a legitimate interest. It is here where the issues arise. On theone hand, Mr and Mrs Hayward were unlikely to be substantially prejudiced by theremoval of their caveat. The removal could have been granted subject to the conditionthat Mr and Mrs Hayward have leave to apply for a second caveat after the refinancinghad gone ahead. But on the other hand, Mr and Mrs Hayward had a genuine interestin the land that they wished to protect, and they were entitled to make reasonable9 Sims v Lowe [1988] 1 NZLR 656 at 660 (CA).10 Pacific Homes Ltd (in Receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at656.11 At 656.12 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA).requests for assurance and/or information they deemed necessary before consenting tothe refinancing.13[19] Having regard to the conduct of both parties, and noting that ultimatelyagreement was reached, I cannot say with certainty that Mr and Mrs Hayward actedso unreasonably that their conduct ought to be viewed as going beyond the genuineprotection of their interest in the property, or that Mr and Mrs Hayward's interestswould not have been prejudiced by the removal of the caveat. In these circumstances,without full argument on the matter and without the substantive proceeding beingdetermined by this Court, it is unclear which party would have prevailed had theapplication proceeded to a hearing. In other words, the matter was finely balancedand could not be "confidently predicted" on the papers. As such, I conclude it isappropriate for costs to lie where they fall.Result[20] The applications for costs by both Hobson and Mr and Mrs Hayward aredismissed. Costs are to lie where they fall._______________________________Powell J13 It is noted that s 145 of the Land Transfer Act 2017 provides that consent to the registration of aninstrument by the caveator "is subject to the rights of the caveator" but a caveator is surely able toconfirm that all parties are clear on what those rights are.