KUOCH v GANDA & Ors (Costs) [2022] NZHC 1150

KUOCH v GANDA & Ors (Costs) [2022] NZHC 1150 [24 May 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2021-404-2178[2022] NZHC 1150UNDER Section 261 of the Property Law Act 2007and Part 19 of the High Court Rules 2016IN THE MATTER OF A lease of premises at 27 Chartwell Avenue,Glenfield, AucklandBETWEEN JOHNLEE HUA MINH KUOCHApplicantAND MAHESH GANDA, MANI GANDA andRAMAN DIYAR GANDA as trustees of theMorar Family TrustRespondentOn the papers: At AucklandJudgment: 24 May 2022JUDGMENT OF POWELL J[on Costs]This judgment was delivered by me on 24 May 2022 at 3.30 pm pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/Counsel:Fortune Manning, P O Box 4139, Auckland(B Rooney, Vulcan Building Chambers, Auckland)Thomas and Co, New Lynn, Auckland(L Ponniah, P O Box 55022, Eastridge, Auckland)[1] This judgment on costs follows my earlier decision granting the application ofJohn Lee Kuoch pursuant to s 261(1)(a)(i) of the Property Law Act 2007 to renew thelease of the premises where his laundromat business is located.1[2] Having granted the application sought I also ordered costs against therespondents as trustees of the Morar Family Trust, the owner of the premises on whichMr Kuoch's business is located ("the trustees"). In the event costs could not be agreedI set out a timetable for the filing of submissions. As there was no agreement andsubmissions have been filed, I now determine the costs issue.2The position of the parties[3] On behalf of Mr Kuoch, Mr Rooney seeks indemnity costs against the trusteestotalling $21,900 plus GST, together with disbursements of $1,409.99, a total sum of$26,594.99. In Mr Rooney's submission the trustees acted unreasonably in opposingthe application and in support of that proposition relies on the various comments madeby me in the course of my first judgment.[4] The trustees oppose any award of costs notwithstanding I have alreadydetermined that costs are properly payable, essentially for the same reasons advancedin the hearing of the substantive application. In addition, Mr Ponniah on behalf of thetrustees, submits with reference to the decision of the Court of Appeal inCunningham v Butterfield3 that as the granting of relief to Mr Kuoch was anindulgence it thereby provides a basis for costs either lying where they fall orotherwise tempers the imposition of increased or indemnity costs as sought byMr Kuoch. The effect of this submission is that if costs are awarded these should beimposed on a 2B basis.Discussion[5] Having considered the submission of counsel against the conclusions reachedin my substantive judgment, I confirm that while costs are payable by the trustees,1 Kuoch v Ganda [2022] NZHC 452.2 At [38].3 Cunningham v Butterfield [2014] NZCA 213.these are appropriately limited to scale costs on a 2B basis and not the indemnity costssought by Mr Kuoch.[6] First, Cunningham v Butterfield, relied upon by the trustees, is clearlydistinguishable from the present case. While the Court was clear that there is nogeneral rule that a lessor is entitled to costs for unsuccessfully opposing an applicationfor relief, it otherwise made it clear that what was required was a principled applicationof the rules.4 In that case the Court was satisfied that in addition to receiving anindulgence the lessee was in breach of his contractual obligations and presumablyresponsible for the dispute that had arisen.5 These factors had to be considered againstthe lessee's success in the litigation and earlier findings that the issues affecting therelationship were not "one-sided".6[7] Given these considerations the Court did not take issue with the trial judge'sconclusion that costs appropriately lay where they fell.7[8] None of the issues considered by the Court of Appeal in Cunningham astempering the liability to costs apply in this case, for the reasons already set out in mysubstantive judgment.8[9] I turn now to the issue of the quantum of the costs payable and whetherindemnity costs are appropriate.[10] Rule 14.6(1)(b) of the High Court Rules 2016 defines indemnity costs as the"actual costs, disbursements and witness expenses reasonably incurred by a party".This can be contrasted with increased costs, being increased costs "otherwise payableunder rules 14.2 – 14.5".[11] Rule 14.6(4) gives a Court a discretion to order a party to pay indemnity costsif:4 At [57].5 At [58].6 At [58].7 At [59].8 Kuoch v Ganda, above n 1.(a) the party has acted vexatiously, frivolously, improperly, orunnecessarily in commencing, continuing, or defending aproceeding or a step in a proceeding; or(b) the party has ignored or disobeyed an order or direction of thecourt or breached an undertaking given to the court or anotherparty; or(c) costs are payable from a fund, the party claiming costs is anecessary party to the proceeding affecting the fund, and theparty claiming costs has acted reasonably in the proceeding; or(d) the person in whose favour the order of costs is made was not aparty to the proceeding and has acted reasonably in relation toit; or(e) the party claiming costs is entitled to indemnity costs under acontract or deed; or(f) some other reason exists which justifies the court making anorder for indemnity costs despite the principle that thedetermination of costs should be predictable and expeditious.[12] The only ground with possible relevance in this case is r 14.6(4)(a), that thetrustees acted "unnecessarily" in opposing Mr Kuoch's application. Pursuing anunnecessary step is also a justification for increased costs in accordance withr 14.6(3)(b)(ii) of the High Court Rules, making it clear that simply taking anunnecessary step is insufficient for indemnity costs.[13] The difference between the different types of costs were explained in theleading authority on indemnity costs, the Court of Appeal in Bradbury v WestpacBanking Corporation.9 In particular the Court noted:10(a) standard scale applies by default where cause is not shown to departfrom it;(b) increased costs may be ordered where there is failure by the payingparty to act reasonably; and(c) indemnity costs may be ordered where that party has behaved eitherbadly or very unreasonably.[14] While for the reasons I set out in my substantive judgment there was no meritin the trustees' response to Mr Kuoch's application, it cannot be said that the trustees9 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.10 At [27].have acted "badly or very unreasonably". Instead while, as Mr Rooney noted, therewas an element of unreasonableness in the trustees' opposition to the application inthe sense that the matters raised were misconceived, when the nature of the presentapplication is taken into account, it does not warrant any form of increased cost.[15] In particular, where in conventional litigation increased costs may well havebeen appropriate in this case it must be always borne in mind, as Mr Ponniah correctlynoted, that the application was necessary because of an oversight on the part ofMr Kuoch. Therefore had the trustees not actively opposed the application there couldhave been no basis for costs against the trustees. Instead the trustees, by pursuing arange of objections that were without merit, put themselves into the same category asthe plaintiffs in Ponsonby Mall Trust Ltd v NZ Food Industries Ltd, a decision wherescale costs were awarded against the landlords, and indeed relied upon byMr Rooney.11 In that case Asher J explained that while it was appropriate for costs tobe awarded against the landlord in similar circumstances to that existing in the presentcase, with regard to the quantum of those costs Asher J explained:12I am not prepared to order that there be any increase in the costs to be paidbecause of the plaintiffs' conduct of the litigation. While they did refuse theCalderbank offer, that refusal is taken into account in the decision to give thedefendant costs in the proceeding that arose from the defendant's error. TheCalderbank offer has already been weighted in the decision to give thedefendant costs at the scale rate.For this reason I disregard the material provided as to the actual costs of thedefendant. The whole purpose of the new rules is to enable the Court to makecosts orders on the basis of scale, rather than actual costs, and there is noreason to depart from that approach in this case.[16] For the same reasons set out by Asher J I likewise conclude that scale costs,and not increased costs let alone indemnity costs, are appropriate in the present case.[17] Based on Mr Rooney's calculation of the relevant steps I am therefore satisfiedthat costs in the sum of $10,994 are payable (based on 4.6 days at $2,390 per day)together with the disbursements of $1,409.99 making a total of $12,403.99.11 Ponsonby Mall Trust Ltd v NZ Food Industries Ltd HC Auckland CIV-2005-404-3631, 8 March2006.12 At [21] and [22].Decision[18] The trustees are to pay Mr Kuoch $10,994 in costs together with $1,409.99 indisbursements, a total of $12,403.99._______________________________Powell J