JOIE DE VIVRE CANTERBURY LTD v CHRISTCHURCH INTERNATIONAL AIRPORT LTD COSTS JUDGMENT [2015] NZHC 1812

JOIE DE VIVRE CANTERBURY LTD v CHRISTCHURCH INTERNATIONAL AIRPORT LTD COSTS JUDGMENT [2015] NZHC 1812 [3 August 2015]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2015-409-000237[2015] NZHC 1812UNDER the Land Transfer Act 1952IN THE MATTER of an application for an order pursuant toSection 145A of the Act that the caveat notlapseBETWEEN JOIE DE VIVRE CANTERBURYLIMITEDApplicantAND CHRISTCHURCH INTERNATIONALAIRPORT LIMITEDRespondentHearing: 31 July 2015 (Costs determined on the papers)Counsel: S D Munro and A L Davidson for ApplicantO D Peers and M J Thomson for RespondentJudgment: 3 August 2015COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS[1] By a judgment dated 7 July 2015 the Court dismissed an originating application by Joie De Vivre Canterbury Limited (JDVC) for an order that a caveat not lapse. Costs were reserved for agreement, or later order of the Court. As agreement has not been reached counsel for each party has filed a memorandum.[2] In considering the memoranda, and reviewing the judgment in preparation of this judgment, I noted an error in the judgment dated 7 July. In paragraph [17] the Court accepted that a caveat would protect rights arising from a registered easement; the word registered was erroneous, and should have been registrable. The judgment will be reissued, duly amended.[3] Counsel for Christchurch International Airport Limited (CIAL) seeks indemnity costs or, alternatively, an uplift in scale costs of 300 per cent. Counsel for JDVC opposes the making of an order for costs on either of these bases, but accepts that an award of costs should be made against it and says that costs should be awarded on a 2B basis.Application for indemnity costs[4] Rule 14.1 of the High Court Rules provides that all matters in relation to costs are at the discretion of the Court, and subsequent rules in relation to costs are subject to this overriding premise.[5] Rule 14.6 provides that a Court may order a party to pay indemnity costs in certain circumstances. CIAL relies on paragraph 4(a):The Court may order a party to pay indemnity costs if –(a) The party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or...[6] In essence, CIAL relies on the findings in the judgment and, in particular:(a) That although the right to lodge a caveat which is given by s 137(1)(a) of the Land Transfer Act is given only in respect of an interest in land held by virtue of an unregistered agreement or other instrument, the interest in CIAL's land which was asserted by JDVC was "derivedsolely and entirely from the only existing source of those rights, theregistered land covenant".1(b) That the argument presented on behalf of JDVC, representing the position taken by JDVC, was fundamentally flawed.2[7] As well, Mr Peers says that in a letter from the solicitors for CIAL to the solicitors for JDVC on 19 March 2015 it was specifically stated that a caveat can1 Paragraph [17] of the judgment.2 Paragraph [17] of the judgment.only be sustained which will protect an equitable interest in land which is capable of being registered in due course. Whilst this is not exactly the same point, the generaltenor of the points made in the letter, as summarised in Mr Peers' submissions, is to the effect that JDVC did not have a caveatable interest in CIAL's land and the caveatshould be withdrawn accordingly.[8] Mr Peers also notes that the greater part of the case presented for JDVC wasdirected to the question of whether the land covenant registered on CIAL's title cannow be enforced, which is a completely different issue from the question of whetherJDVC at any point had a caveatable interest in CIAL's land, which is an interestwhich must arise from an unregistered agreement or other instrument.3 Relevant or not, CIAL still had to meet this argument.[9] Finally, Mr Peers asserts that the caveat was lodged in an attempt to place JDVC in a position where it could claim compensation for the loss of the rights asserted in the caveat, because the land over which the easement would be granted is to vest in the Council as a result of the way the southern airport access is now designed.4 Mr Peers says this amounts to the use of the caveat process for an ulteriorpurpose and is therefore a factor that should be considered in relation to his client'sclaim for indemnity costs.[10] Mr Munro, in response, says that two of the principles for determination of costs set out in r 14.2 must be taken into consideration. First, it is provided that an award of costs should reflect the complexity of the proceeding, and Mr Munro says this was not an especially complex case.5 Secondly, he says that in deciding an appropriate daily recovery rate, a reasonable time for an award of costs should not depend on the skill or experience of the solicitor or counsel involved or on the actual time spent, or on the costs actually incurred by the party claiming costs.6[11] Secondly Mr Munro says that the costs claimed are excessive, and notes that CIAL says in support of its application that removal of the caveat was an issue of3 Section 137(1)(a).4 Discussed in paragraphs [12] and [13] of the judgment.5 Rule 14.2(b).6 Rule 14.2(e).substantial importance for CIAL, resulting in costs being at what it describes as the higher end of the spectrum for a caveat hearing. Mr Munro says that JDVC should not be required to bear the high cost incurred by CIAL because of the importance CIAL put on a successful outcome. He also says that contrary to the claim by CIAL, there was no urgent need for removal of the caveat, and its presence on the title did not result, and would not result, in delays to the intended transfer of land to the Crown for finalisation of the southern airport access system.[12] Thirdly, Mr Munro notes that in a memorandum filed on related proceedings in the Environment Court in April, JDVC put CIAL on notice of its wish to have its easement registered, but CIAL did not respond.Discussion[13] The starting-point for this discussion is an assessment of JDVC's case, inorder to determine whether it acted within the terms of r 14.6(4). It is unnecessary to repeat the analysis in the principal judgment. Earlier in this judgment I have referred to comments made in that judgment about the position taken by JDVC in relation to the caveat it lodged.[14] However, in his memorandum,7 Mr Munro, whilst noting respect for the earlier judgment of the Court, advises that JDVC held a genuine belief, based upon reasonable grounds, that it had an arguable case that the caveat should be sustained, and that it was capable of being sustained. For this reason it is necessary to repeat, briefly, why this position is utterly without foundation.[15] The sole ground stated in the caveat for claiming an interest in CIAL's landwas the right given to JDVC in the land covenant which is registered on the title. It is trite to state that as the registered proprietor of a fee simple estate, CIAL has all the rights in the land subject only to statute or other rights which may have been transferred away. The only rights claimed, or claimable, by JDVC, were those given to it by the land covenant. Necessarily, and as a matter of basic principle, JDVCcould not obtain any further right, which would detract from CIAL's rights as7 Paragraph [23].registered proprietor of the fee simple estate, without CIAL granting those rights. At no point has CIAL done so. Its sole grant of rights to JDVC is by the land covenant. JDVC could not come to hold any right beyond or outside the rights granted by CIAL by the land covenant through any other means unless CIAL were to so agree, which it has not. As s 137 permits the registration of a caveat only to protect a right which is given by an unregistered instrument, the lodgement of the caveat was without a statutory foundation and was thus fundamentally flawed. On its face the caveat was not registrable.[16] I therefore find that this proceeding, in which JDVC sought to sustain the caveat which I have described, was without merit. Further, there is force in the argument for CIAL that JDVC was using the caveat procedure for the purpose of putting itself in a better position, as it saw it, in relation to a claim for compensation for loss of its rights to an easement over the land which would ultimately become road. I made brief reference to this point in paragraphs [12] and [13] of the judgment, but did not elaborate upon it because it was unnecessary to do so.[17] Mr Munro drew my attention to Gosney v Ngai Tahu Property Ltd,8 where the Court noted that indemnity costs are a recognised exception to the general position that scale costs are paid by a party losing a case, and that an award of indemnity costs is only justified in exceptional circumstances. In that case the Court noted that New Zealand has consciously elected to adopt a party-party cost system in which the winner will usually be entitled to a reasonable contribution to costs, rather than a full indemnity. Even so, indemnity costs may be ordered where a party establishes very unreasonable or flagrant conduct as a gateway to seeking such an award.[18] Mr Munro says that JDVC was entitled to test the issues raised by its caveat, and that it considered that it had an unregistered interest in the property separate and distinct from the land covenant, which was capable of sustaining a caveat. I am unable to accept this submission for two reasons. The first, and most obvious, is that it did not claim to have an unregistered interest in the property separate and distinct from the land covenant; it expressly relied on that document as the source of the8 Gosney v Ngai Tahu Property Ltd [2015] NZHC 945.right it claimed.9 Secondly, this proposition is contrary to principle for the reasons I have discussed in both the substantive judgment and this judgment.[19] For these reasons I find that CIAL has established a basis upon which the Court may order JDVC to pay indemnity costs. The latter has acted within the terms of r 14.6(4)(a) by bringing an unnecessary proceeding without any foundation in principle, at least arguably with an ulterior motive, as I have discussed.[20] The provisions of r 14.2 to which Mr Munro referred are general principles to be taken into account by the Court in deciding issues of costs, but the rules in relation to the payment of indemnity costs are specific. In my view the correct interrelationship between r 14.6(4) and the principles in r 14.2 is that the former sets out thresholds, one of which must be overcome in order to enable the Court to order a party to pay indemnity costs, then in deciding whether to do so the Court should take into account, among such other factors as are relevant, the principles set out in r 14.2.[21] Having considered the evidence presented by the parties as a whole, I amsatisfied that prompt resolution of JDVC's claim to a right to sustain the caveat wasof considerable importance and significance, in terms of r 14.2(b), to CIAL and that it was relatively urgent that this issue be resolved. On the evidence presented to the Court it is clear that development work is proceeding and that in the due course of that work it will be necessary for a transfer of the land over which the caveat was registered to be effected. Whether that is to take place in the immediate future is not the point. The plain fact is that the caveat was without foundation and was standing in the way of the timely progression of the development, which involved not only CIAL, but also other parties whose duty it is to ensure timely completion of the southern airport access and attendant modifications to the state highway system at that point. I do not consider that the importance and significance of a prompt outcome to this case has been in any way overstated by CIAL and I do not accept that JDVC should not be required to accept responsibility for the cost incurred by CIAL in responding to this application. This is specifically provided for in r 14.2(b).9 The estate or interest claimed by JDVC is set out at paragraph [4] of the substantive judgment.[22] Finally, r 14.2(e) does not assist in the present evaluation as the Court is not deciding on an appropriate daily recovery rate, nor reasonable time. Rather, it is considering the principles applicable to awarding indemnity costs.[23] I therefore turn to the quantum of costs in respect of which indemnity is sought.The quantum of costs[24] JDVC claims professional fees of $59,637 together with office charges of $1,490.93 and filing fees of $139.03, all figures being GST exclusive. Mr Peers saysthat the firm spent 147.9 hours on the case. Mr Peers accepts that the costs are "at the higher end of the spectrum" for a case involving the removal of a caveat. Hesays, however, that removal of the caveat was an issue of substantial importance, which I have accepted, because of the cost and potential downstream consequences of the delays which the caveat had caused to the construction of the southern airport access, and the further cost and delay that would have arisen had it been sustained. As Mr Peers puts it, CIAL could not leave any issue to chance. The southern airport access forms part of the Russley Road/State Highway 1 four lane development project, which Mr Peers informs the Court is part of the Roads of National Significance Programme. As a result CIAL had no option but to thoroughly assess and respond to every issue raised by JDVC. Whilst these issues were not, in the end, the basis upon which the Court decided the case, nonetheless it was necessary to prepare for them.[25] Mr Munro points out that the sums claimed by way of indemnity amount to over five times the costs that might be awarded in this case on a 2B basis, which he says is the correct scale. He describes the number of hours spent as excessive and says the claim is unreasonable and not appropriate. As noted, he says that the caveat has not resulted in delays to the intended transfer of the land.[26] I agree with Mr Peers that the sum claimed by way of indemnity costs is at the higher end of the band of costs that might be expected to be incurred in opposing an application of this kind. It must be remembered, however, that CIAL was in factresponding to the case presented by JDVC. This was not an application by CIAL to remove the caveat. On a removal application it would have been open to CIAL to specify the grounds for removal and contain the ambit of argument to the real points in issue. As it was, however, the real thrust of the argument presented for JDVC was that it wished to enforce its land covenant, being of the view that the preconditions to enforcement had all been satisfied. The difficulty with that approach, however, is that it has nothing to do with sustaining a caveat which is a separate statutory right available to a party on a confined basis. If JDVC was truly of the view that it was in a position to require CIAL to perform its obligations under the land covenant, an entirely different proceeding should have been brought. Caveats have nothing whatsoever to do with enforcement of contracts which are the subject of registered land covenants. Caveats merely protect the interest of the holder of an unregistered interest in land to ensure that nothing happens on the title adverse to the unregistered interest until it is able to be registered.[27] In my view, given the importance of removal of the caveat from its title, in the circumstances which are outlined in this judgment and the substantive judgment, CIAL was entitled to require its solicitors to respond fully to the case presented against it, even though it might have been able to confine argument to the real points at issue, had it elected to apply itself for the caveat to lapse. JDVC cannot launch a proceeding based on a flawed caveat and present its case without any mention in its application, evidence or its principal written submissions of the issue arising under s 137, present a comprehensive argument which was manifestly wide of the mark, and then expect CIAL to bear the greater part of costs associated with competently and fully responding.Claim for increased costs[28] Given the order now made it is unnecessary to discuss CIAL's alternativeapplication.Outcome[29] JDVC will pay to CIAL costs in the sum of $60,996.96._______________________J G MatthewsAssociate JudgeSolicitors:Anderson Lloyd, Christchurch.Buddle Findlay, Christchurch.