PUB CHARITY INC v DEPARTMENT OF INTERNAL AFFAIRS [2016] NZCA 11

PUB CHARITY INC v DEPARTMENT OF INTERNAL AFFAIRS [2016] NZCA 11 [12 February 2016]IN THE COURT OF APPEAL OF NEW ZEALANDCA868/2013[2016] NZCA 11BETWEEN PUB CHARITY INCAppellantAND DEPARTMENT OF INTERNALAFFAIRSRespondentCourt: Randerson, Wild and Cooper JJCounsel: L McKay and M S Smith for AppellantK Muller for RespondentJudgment:(On the papers)12 February 2016 at 10:00 amJUDGMENT OF THE COURT (COSTS)A The respondent must pay costs to the appellant for a standard appeal on a band A basis for all steps up to and including preparation for the hearing of the appeal together with disbursements as fixed by the Registrar.B The quantum of costs payable by the appellant to the respondent in the High Court is to be agreed or fixed by that Court.____________________________________________________________________REASONS OF THE COURT(Given by Randerson J)Introduction[1] The appeal brought by the appellant (Pub Charity) against a judgment of Simon France J1 was discontinued by notice of 4 May 2015 a little over two weeks before the appeal was due to be heard. In consequence, the fixture was vacated, the parties indicating they would endeavour to reach agreement as to costs but reserving the right to approach the Court should agreement not prove possible.[2] The parties have been unable to reach agreement as to costs and each now seeks costs against the other. As well, Pub Charity asks the Court to reverse an orderfor costs made in the respondent Department's favour in the High Court.[3] The parties are agreed that the costs issues may be determined on the papers. We regret the delay in issuing this judgment.Background[4] Pub Charity is the holder of a class 4 operator's licence under the GamblingAct 2003 (the Act). In July 2010, the Department gave notice under the Act of aproposal to suspend Pub Charity's licence. It was alleged Pub Charity hadaccumulated substantial reserve funds contrary to relevant regulations and a condition of the licence. Pub Charity disputed the notice and subsequently issued proceedings in the High Court seeking relief against the Department under the Declaratory Judgments Act 1908.[5] The pleadings were subsequently amended and proceeded on the basis of a third amended statement of claim seeking four declarations as to the correctcalculation of "net proceeds" under the Act and an order setting aside the Department's proposal to suspend the licence. Reliance was placed on the Judicature Amendment Act 1972 and pt 30 of the High Court Rules.[6] Simon France J determined two separate legal issues relating to thecalculation of "net proceeds" under the Act. The first was whether a cash price for the purchase of a gaming machine was appropriate or whether a depreciation1 Pub Charity v Department of Internal Affairs [2014] NZHC 1096.approach was required. The second was whether the purchase price of a gaming machine was to be treated as an expense reducing gross proceeds under Part A of the definition of net proceeds or as a cost of business under Part B.[7] Both these questions were determined in favour of the Department. Counsel for Pub Charity accepted in the High Court there was no basis to challenge the proposed suspension of its licence if Pub Charity's interpretation of the legal issuesdid not prevail. Costs were awarded by the High Court in favour of the Department although we were told the quantum of those costs has yet to be determined.[8] Pub Charity appealed to this Court against the first issue decided against it in the High Court. A fixture for 19/20 May 2015 was allocated and Pub Charity filed its submissions on 17 April 2015. By letter of 30 April 2015, the Department wrote to Pub Charity in these terms:1. As you are aware, the above-mentioned appeal is to be heard on Tuesday 19 May 2015.2. The Department has now reviewed the submissions filed on PubCharity's behalf dated 17 April 2015 and will be filing submissions indue course.3. For present purposes, I note that Pub Charity's submissions state:The issue on this appeal remains, however, an important one, both forthe calculation of "net proceeds" for periods prior to 1 October 2015,and more significantly, on account of the DIA's proposal to suspend Pub Charity's Operator's Licence in respect of its approach to thecalculation of "net proceeds" in earlier years.4. During the High Court hearing, I am advised that His Honour SimonFrance J put it to counsel for the Department that the Department'sproposal to suspend dated 2 July 2010 would likely need to be re- evaluated regardless of the outcome of the hearing. Counsel agreed this was the case.5. Noting Pub Charity's arguments to the contrary, the Departmentremains of the view that its interpretation and application of the net proceeds definition is correct.6. However, as a result of information disclosed during these proceedings, in particular in your affidavit in reply dated 13 September 2013, the Department has received from Pub Charity information that explains the Equity and Local Donations accounts referred to in the proposal to suspend dated 2 July 2010. As a consequence it no longer contends that Pub Charity: Accumulated cash for the purpose of future asset purchases; Deducted, in its calculation of net proceeds, both the cost of machine purchases as well as depreciation; or May have "triple counted" the cost of asset purchases in the netproceeds calculation.7. Therefore, and for the avoidance of doubt, I am writing to formallywithdraw the Department's proposal to suspend dated 2 July 2010.8. I also wish to advise that, regardless of the outcome of Pub Charity'sappeal, the Department does not intend pursuing a suspension of PubCharity's Operator's Licence (or any other form of sanction) regardingthe issues that are the subject of the Department's proposal to suspend(and this appeal).(emphasis added)[9] By notice of 4 May 2015, Pub Charity formally abandoned its appeal, reserving the issue of costs. In an accompanying memorandum, Pub Charity said it was abandoning the appeal in consequence of the Department's advice that it would not be pursuing the proposal to suspend Pub Charity's licence.[10] Pub Charity now seeks:(a) Costs against the Department in this Court of $45,423 and disbursements of $532.53;(b) An order quashing the order for costs made in favour of the Department in the High Court and, instead, costs against the Department of $33,279.50 and disbursements of $3,406.19.[11] The Department resists any order for costs against it and seeks costs in this Court against Pub Charity of $18,522 and disbursements of $177.64.Costs in this Court[12] Under r 44(3) of the Court of Appeal (Civil) Rules 2005 (the Rules), theabandonment of an appeal does not affect the power of the Court to make "any order as to costs in respect of the appeal". Ordinarily, costs are payable to the respondentwhere an appeal is abandoned but particular circumstances may justify a departure from that approach.2[13] Here Mr McKay submits on Pub Charity's behalf that it is entitled to costs onthe following grounds:(a) The Department's letter of 30 April 2015 meant Pub Charity had achieved its aim of resisting the proposal to suspend its licence.(b) The appeal was effectively rendered redundant by the passage of amendments to the definition of net proceeds under the Act made after the filing of the appeal.(c) The Department's letter and the apparent need for statutoryamendments showed that the Department had recognised the appeal would likely succeed.(d) The information in Pub Charity's reply affidavit in the High Court(referred to at [6] of the Department's letter as the apparent basis for the Department abandoning the proposal to suspend Pub Charity'slicence) was available before the determination of the High Court proceedings and should have been acted upon by the Department much earlier.[14] Ms Muller disputed each of these grounds on behalf of the Department. She submitted that the issues in the High Court were essentially questions of law and thatthe issue of the suspension of Pub Charity's licence was not relevant to thosequestions. Even if the interpretation issues had been decided in Pub Charity'sfavour, it would have been necessary for further steps to be taken to determine whether, as a matter of fact, there were grounds to suspend the licence. Further, there is no basis to infer that the appeal would likely have succeeded if it had not been abandoned. The Department had intended to proceed to oppose the appeal eventhough Pub Charity's licence was no longer in contention. The amending legislation2 Chapman v Badon Ltd [2014] NZCA 613, (2010) 20 PRNZ 83 at [14]. The Court is usually reluctant to examine the reasons for the discontinuance except in a clear case, as explained inPowell v Hally Labels Ltd [2014] NZCA 572 at [19]–[24].did not apply retrospectively and it was important to have the correct interpretation of the Act established in respect of all class 4 operators. The abandonment of the appeal prevented that occurring.[15] Despite Ms Muller's submissions, we are satisfied that, from Pub Charity'sviewpoint, the proposed suspension of its licence underlay the High Courtproceedings and the appeal. The Department's late abandonment of its proposed suspension of Pub Charity's licence meant it was no longer necessary forPub Charity to pursue its appeal. We conclude that, in the particular circumstances of this case, the Department ought to pay costs to Pub Charity on the abandonment of the appeal.[16] However, we do not accept Pub Charity's submission that costs should beawarded on a category B complex appeal basis. Despite Ms Muller's acceptance thatthis was a proper basis for any costs award, we see nothing of unusual difficulty to warrant costs on this basis. Costs are to be for a standard appeal band A.[17] Mr McKay sought a 50 per cent costs uplift under r 53E(2)(a) of the Rules on the basis the Department had contributed unnecessarily to the time or expense of the appeal by taking or pursuing an unnecessary step. We are not persuaded any upliftshould be made. We accept Ms Muller's submission that it was appropriate for the Department to seek to uphold the High Court judgment in its favour irrespective ofits ultimate decision not to proceed with its proposal to suspend Pub Charity'slicence. It was not suggested that Pub Charity was put to unnecessary expense by any specific step taken by the Department other than its wish to uphold the High Court judgment.Costs in the High Court[18] We can deal with this issue shortly. This Court doubted in Chapman v Badon Ltd whether there was jurisdiction to quash or vary an order for costs in theHigh Court where an appeal is discontinued and the Court has not considered the substantive appeal.3 Mr McKay urged us not to follow Chapman pointing to rr 48(4) and 53J for a more expansive approach. There is the obvious difficulty that in most cases, it will be difficult to assess the prospects of success of the appeal.[19] We share the doubts expressed in Chapman v Badon Ltd about the ability of this Court to quash or vary a High Court costs order where an appeal in this Court is abandoned without substantive argument. Even if there is jurisdiction, we do not consider it should be exercised in this case. First, the appeal was abandoned in itsentirety. While the issue of costs in the High Court was raised in counsel'smemorandum the ability of this Court to interfere with costs orders made in the lower court on the basis of limited information is problematic. Second, we see no basis on the limited material available to us to interfere with the order made in the High Court. The proceedings were primarily concerned with the correct interpretation of the Act and the outcome favoured the Department. In consequence, it was unnecessary for Simon France J to determine the issue of the proposedsuspension of Pub Charity's licence. We see no reason why costs should not follow the event in that Court.Result[20] The respondent must pay costs to the appellant for a standard appeal on a band A basis for all steps up to and including preparation for the hearing of the appeal together with disbursements as fixed by the Registrar.[21] The quantum of costs payable by the appellant to the respondent in the High Court is to be agreed or fixed by that Court.Solicitors:Paul Cheng & Co, Wellington for AppellantCrown Law Office, Wellington for Respondent3 Chapman v Badon Ltd, above n 2, at [10] and [11] referring also to Parsot v Greig Developments Ltd [2009] NZCA 241, (2009) 10 NZCPR 308 at [33].