GOSNEY v NGAI TAHU PROPERTY LIMITED [2015] NZHC 945

GOSNEY v NGAI TAHU PROPERTY LIMITED [2015] NZHC 945 [6 May 2015]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2015-409-000010[2015] NZHC 945BETWEEN BRIAN ARTHUR GOSNEY ANDAUDREY LAURA EDWARDSAppellantsAND NGAI TAHU PROPERTY LIMITEDRespondentHearing: Dealt with on the papersJudgment: 6 May 2015JUDGMENT OF GENDALL J(As to Costs)The Gosneys seek costs[1] On 17 March 2015 in this proceeding I allowed an appeal by Mr Gosney and Ms Edward (who I refer to as "the Gosneys") from a decision of the District Court in relation to what was essentially a fencing dispute.1 The background facts are set out in that judgment and I need not repeat them here. In that decision however I recorded the following on the issue of costs:[37] I now turn to the issue of costs. Costs here are reserved. As I understand it from earlier submission, there is a suggestion that the appellants, the Gosneys, may wish to seek indemnity costs on this appeal and in the District Court proceeding. As the Gosneys have succeeded on this appeal, costs will follow the event in the absence of compelling reasons to the contrary. Memoranda on costs are to be filed by the appellants, the Gosneys, within 10 working days of the date of this judgment, with the respondent, Ngai Tahu, following not later than 10 working days thereafter. Memoranda on costs are limited to five pages in length. I will then deal with the matter of costs on the papers in the absence of either party indicating they wish to be heard on the matter.1 Gosney v Ngai Tahu Property Ltd [2015] NZHC 515.[2] Memoranda from counsel for the parties have duly been filed. The positions taken by the parties can be summarised succinctly. The Gosneys seek indemnity costs, or, in the alternative, increased costs here, while the respondent, Ngai Tahu Property Ltd (Ngai Tahu), accepts it is to pay costs but considers that 2B scale costs only would be appropriate.[3] The basis on which the Gosneys seek indemnity or increased costs here as they contend is as follows:(a) Ngai Tahu acted improperly or unnecessarily in commencing and continuing with the proceeding. In essence, the Gosneys say thatNgai Tahu's argument pursuant to s 22 of the Fencing Act 1978 wasmisconceived and clearly contrary to the plain meaning of s 8.(b) The result of Ngai Tahu's plainly incorrect legal interpretation of the Fencing Act 1978 was that it was entirely incorrect for it to seek an injunction.(c) Ngai Tahu did not seek to explain its position to the Gosneys in the face of Ngai Tahu unlawfully entering the land owned by the Gosneys. There was therefore no opportunity for the parties to engage in discussions.(d) Prior to the Gosneys commencing their appeal, they sent an open letter to Ngai Tahu, proposing terms of settlement, namely that Ngai Tahu agree to the District Court order being set aside and the Gosneys would then consent to the fence remaining in its location. No response was received to the letter.[4] Ngai Tahu's claim that 2B costs are appropriate here it says is supported bythe following propositions:(a) The actual costs of the Gosneys are out of proportion to the work involved in both the District Court and the High Court.(b) In the District Court the Gosneys consented to the placement of the fence in accordance with s 22 of the Fencing Act 1978, which was later revoked. That there was consent was one of the fundamentaltenets of Ngai Tahu's claim in the District Court. The claim wastherefore not solely predicated on s 22.(c) Ultimately, it says there are no exceptional circumstances justifying indemnity costs in this case.[5] A reply memorandum was filed by counsel for the Gosneys, which as I see it further clarified matters.Resolving the competing costs contentionsIndemnity costs principles[6] Rule 14.1 of the High Court Rules notes that costs are at the discretion of the Court. It is well accepted, however, that the general discretion is qualified by the specific costs rules.2 It is also accepted in the sphere of civil litigation that "there isa strong implication that a Court is to apply the regime [in the rules] in the absenceof some reason to the contrary".3 The general discretion therefore only becomes live"in situations not contemplated or fairly recognised by" the costs rules.4 The costs discretion, as with other judicial discretions, is not unfettered – it must be exercised judicially in accordance with reason, logic and fairness.5[7] Indemnity costs are a recognised exception to the 'usual' position within therules that scale costs are to be paid by the loser (thus following the event).[8] Indemnity costs are only justified in exceptional circumstances. New Zealand has consciously elected to adopt a party-party costs system in which the victor will usually be entitled to a reasonable contribution to costs upon success,2 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [6].3 Mansfield Drycleaners Ltd v Quninny's Drycleaning (Dentice Drycleaning Upper Hutt) Ltd(2002) 16 PRNZ 662 (CA) at [27].4 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [6].5 Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [6], citing Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [9], itself citing Cates v Glass [1920] NZLR 37.rather than a full indemnity. This is generally in contrast to the English position. InBradbury v Westpac Banking Corporation, the Court of Appeal quoted Sir RupertJackson's Review of Civil Litigation Costs, commenting:6It is a feature of England and Wales that we have full cost shifting, i.e. a reasonable litigant can in principle expect to recover every penny which they have reasonably incurred in bringing or defending their case successfully. This is in contrast to many other jurisdictions where, although cost shifting exists, the amounts recoverable are strictly regulated such that one would normally expect costs recovered from the other side to be less than costs asbetween solicitor and own client. The New Zealand system is a goodexample of such an approach. Such a policy of less than full cost recovery has as one of its aims making litigation unattractive for the parties so as to encourage early and reasonable settlement.[9] Something outside the ordinary is therefore required before the Court will so substantially depart from the presumptive position of scale costs only being awarded. Some such situations are provided for within r 14.6(4). For example, these are:(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.[10] Even so, the party seeking indemnity costs must generally be able to establish"bad", "very unreasonable" or "flagrant" conduct as a gateway to seeking such anaward.7The merits of the case fall on the Gosneys' side of the fence[11] I consider this to be a case where the indemnity costs threshold has been reached. And essentially the total amounts claimed for actual indemnity costs and disbursements here by the Gosneys being $29,592.80 (for both defending the District Court proceeding and the appeal) once the details outlined in the 29 April 2015 reply memorandum from Mr Armstrong for the Gosneys were provided, are not contested in any real way and would seem to be reasonable. I therefore award the Gosneys6 Bradbury v Westpac banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [16].7 At [27]; Prebble v Huata [2005] NZSC 18, [2005] 2 NZLR 467 at [6].indemnity costs and disbursements in the sum claimed amounting to $29,592.80. This is essentially because, as I see it, Ngai Tahu here has acted both unnecessarily and improperly in commencing and sustaining a meritless proceeding. In particular:(a) Section 22 of the Fencing Act 1978 was an unsustainable basis for bringing the application. This is particularly so in light of the Parliamentary materials to which Ngai Tahu alluded, but plainly did not peruse in any detail. Section 8 of the Act makes this all the moreapparent. Further, even on Ngai Tahu's incorrect interpretation, its counsel Mr Riches was unable to explain how a right to enter the Gosneys land would arise in the absence of a Court order. This simply further highlights the fundamental error in proceeding as it did.(b) An interim injunction was not the correct procedure for resolving the dispute. An application permitting encroachment of the fence could have been brought as contemplated by s 8. Alternatively, Ngai Tahu could have engaged in a dialogue with the Gosneys, but instead it seems chose to issue and pursue proceedings.(c) The orders ultimately obtained were plainly wrong on the face of the record, referring as they did to an incorrect address and incorrect boundaries.(d) Ngai Tahu erroneously referred to the requirement to fence its subdivision as a basis for erecting the fence along the boundary. There was nothing in the requirement to fence to indicate that the fence had to be erected along rather than inside the boundary.(e) The Gosneys had little choice but to appeal in order to vindicate their rights and ventilate the issues which arose in the District Court. On appeal they were wholly successful. Following the proceedings being issued, it appears Ngai Tahu continued to refuse to engage with the Gosneys, with continued prima facie trespasses to their land during this period. Where a party finds themselves unwillingly caught in awhirlpool of meritless litigation and appeals to vindicate their position, in my view this will often present appropriate circumstances for them to be indemnified in costs for being put to unnecessary trouble and expense.(f) I take no account of pre-litigation conduct, though in this case it does have a bearing upon the proceeding itself. This is particularly so given that as I understand it, this proceeding was issued in the absence of discussions, which could have prevented it.(g) As to Ngai Tahu's position on consent, I find that the Gosneys may have consented to the theoretical location of the fence on or around the boundary, but they did not consent to the fence itself, nor to its construction, and there was never any agreed compromise between these neighbours.[12] Because of the conclusion I have reached in respect of the Gosneys' primaryargument that they should receive indemnity costs (and that the uncontested quantum of the amount claimed is reasonable), I need not consider the issue of increased or scale costs.Outcome[13] Ngai Tahu is to pay the Gosneys' actual costs and disbursements here of $29,592.80....................................................Gendall JSolicitors:Young Hunter, ChristchurchSaunders & Co Christchurch