SELF-REALIZATION MEDITATION AND HEALING CENTRE CHARITABLE TRUST (NEW ZEALAND) v IAG NEW ZEALAND LIMITED [2018] NZHC 2612

SELF-REALIZATION MEDITATION AND HEALING CENTRE CHARITABLE TRUST (NEW ZEALAND) vIAG NEW ZEALAND LIMITED [2018] NZHC 2612 [5 October 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2016-409-000816[2018] NZHC 2612BETWEEN SELF-REALIZATION MEDITATION ANDHEALING CENTRE CHARITABLETRUST (NEW ZEALAND)PlaintiffAND IAG NEW ZEALAND LIMITEDDefendantAND H CONSTRUCTION NORTH ISLANDLIMITED (FORMERLY HAWKINSCONSTRUCTION LIMITED)First third PartyAND ORANGE H MANAGEMENT LIMITED(FORMERLY HAWKINS MANAGEMENTLIMITED)Second third PartyAND BRENCHLEY DEVELOPMENTSLIMITEDThird third partyAND BUILDING ONWARD LIMITEDFourth third partyAND HI TECH BUILDING SYSTEMS LIMITEDFifth third partyAND ORANGE H GROUP LIMITED(FORMERLY HAWKINS GROUPLIMITEDSixth third partyDetermined on the papersRepresentation: R C Evans for Fourth third partyP K Tucker for Fifth third partyO Collette-Moxon for DefendantJudgment: 5 October 2018JUDGMENT OF ASSOCIATE JUDGE OSBORNE(Costs)Introduction[1] On the application of the fourth and fifth third parties ("Onward" and "HiTech"), the Court gave judgment setting aside the third party notices in question.1[2] The Court determined that costs must follow the event. It anticipated thatcounsel would agree that costs should be on a 2B basis,2 without a certificate forsecond counsel.3 Directions were made for the filing of memoranda as to costs in theevent of any disagreement between the parties. There has been a measure ofdisagreement with the result that memoranda have been filed.Measure of agreement[3] Counsel responsibly conferred as to costs after the publication of the judgment.[4] Ms Evans for Onward and Ms Tucker for Hi Tech calculated costs on a 2Bbasis (together with disbursements) at $23,826.73. Counsel for the defendant ("IAG")promptly confirmed agreement as to the calculation of the amount.[5] In the submissions subsequently received, there is no suggestion that the 2Bcalculation was incorrect. I have reviewed the items taken into account. Assumingthere is to be a 2B calculation, they are correctly claimed and calculated.1 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG NewZealand Limited [2018] NZHC 20772 High Court Rules, Category 2 under r 14.3(1) and band B under r 14.5(2).3 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG NewZealand Limited, above n 1, at [70].The difference between the parties[6] The major difference between the parties is as to when the costs should be paid(if at all).[7] Since the setting aside judgment was issued, IAG has made application forreview. That application has been allocated a firm hearing date.[8] The third parties want their costs and disbursements to be payable now.[9] When Ms Harris (for Onward) wrote to IAG's solicitors in relation to the$23,826.73 calculation, she stated:We invite your client to agree to pay $23,826.73 by 5.00 pm Friday 17 August,failing which we have instructions to proceed to an application to the Courtand seek costs with a 50% uplift.[10] Ms Tucker for Hi Tech sent a letter to similar effect.[11] IAG's solicitors, when replying with confirmation that the $23,826.73calculation was accepted, proposed that costs (instead of being paid immediately) benot paid until the application for review is determined.[12] Soon afterwards, the solicitors for both Onward and Hi Tech notified IAG'ssolicitors that they regarded the costs (as calculated and discussed) as now payable.They referred to r 14.8(1)(b) High Court Rules.[13] Rule 14.8(1) states:Costs on interlocutory applications(1) Costs on an opposed interlocutory application, unless there are specialreasons to the contrary, –(a) must be fixed in accordance with these rules when theapplication is determined; and(b) become payable when they are fixed.[14] For IAG, Mr Collette-Moxon responded that the parties had agreed the amountof costs, not that the costs were actually payable. He observed that this was a questionof the nature of agreement between parties and not a matter of the Rules.Discussion[15] The costs and disbursements of the interlocutory application have not becomepayable in terms of r 14.8(1)(b). That is because they have not been fixed inaccordance with r 14.8(1)(a). As Mr Collette-Moxon observed in his correspondence,the figure of $23,826.73 had been arrived at through (conditional) agreement of theparties not through fixing by the Court.[16] There was therefore no basis on which the third parties could claim, as theydid, that the $23,826.73 was now payable. A reading of the plain words of the parties'correspondence makes clear the conditionality which attached to the positions of therespective parties.The third parties' positions diverge[17] On filing their respective submissions on costs, the positions of Onward andHi Tech have diverged.[18] Hi Tech relies on the agreement as to quantum earlier reached and asks fororders fixing that quantum and making it payable under r 14.8(1)(b). Onward alsoseeks an additional sum of $1000 on account of the costs of filing costs submissions.[19] Onward no longer pursues an argument as to the $23,826.73 being payableunder r 14.8(1)(b). Instead it now pursues an order awarding it increased costs underr 14.6(3) High Court Rules (calculated by reference to a 50 percent uplift on a 2Bcalculation).[20] Ms Evans (for Onward) submits that increased costs are justified on the basisthat:(a) IAG pursued an unnecessary step in adding Onward as a third partyand pursued an argument which lacked merit despite repeatedcommunications identifying the lack of merit;(b) IAG refused without reasonable justification to accept Onward's offersthat there be a discontinuance with costs to lie where they fall;(c) IAG is now vexatiously refusing to make payment despite costs havingbeen agreed.[21] For IAG, Mr Collette-Moxon submits that the practicable and just solution isthat costs be reserved until the outcome of the review application. To the extent thatOnward now seeks increased costs, Mr Collette-Moxon submits that increased costsshould be refused for two reasons. First, because the fourth third party has agreed thequantum of $23,826.73, and secondly because there is no basis for increased costs interms of r 14.6(3).Discussion – r 14.8[22] There is one thing which the Court (unless there are special reasons to thecontrary) must do in terms of r 14.8(1) with one stated consequence. What the Courtmust do is fix the costs when the interlocutory application is determined. Theconsequence of such fixing (unless the Court for special reasons determines otherwise)is that the fixed costs will become payable at that point.[23] There is no demonstrated, let alone a special, reason in this case not to fix thecosts while the interlocutory proceeding is fresh. In this regard I adopt the observationauthors of McGechan on Procedure that, even when costs (meaning the incidence ofcosts) are reserved, it may be wise to fix their quantum.4[24] That leaves for decision whether the costs to be fixed should become payablenow, at the point they are fixed.4 AC Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at[HR14.8.04].[25] I do not regard it as appropriate in relation to this interlocutory proceeding tohave costs become payable at the point they are fixed. The defendant has promptlyexercised its right to apply for review of the interlocutory judgment. The parties haveobtained a hearing date.[26] The Court of Appeal explained the purpose of the review procedure in GraebarHoldings Limited v Taylor.5 The Court observed of the-then numbered rule;Rule 264 is intended to provide an alternative to an appeal to this Court so thatinterlocutory matters may be dealt with expeditiously and less expensively inthe High Court.[27] The outcome of the third parties' interlocutory applications will now bedetermined through the review procedure. As Mr Collette-Moxon submits, if IAG'sreview application succeeds the affected third party would not be entitled to costs. (Atthat point, if the defendant's review applications have been successful, the Court islikely to make an order under r 14.8(2) High Court Rules).[28] The existence of the application for review, with its allocated hearing date, isa special reason which cuts across the default expectation under the High Court Rulesthat costs of interlocutory applications (if fixed upon the determination of theapplication) will become payable at that point.[29] A direction will accordingly be made, in fixing the interlocutory costs, that theywill not become payable until further order of the Court.Discussion – increased costs[30] Onward alone makes an application for increased costs.[31] I put to one side Mr Collette-Moxon's submission that Onward is not entitledto apply for increased costs by reason of an agreement reached as to scale costs. Theparties did not reach such an agreement unconditionally. That leaves Onward'sapplication to be determined by reference to the considerations identified in r 14.6(3).Ms Evans relies on two particular considerations.5 Graebar Holdings Limited v Taylor [1989] 2 NZLR 10 (CA) at 16.[32] In terms of r 14.6(3)(b)(ii) Ms Evans submits that IAG pursued an unnecessarystep or an argument which lacked merit.[33] Such a conclusion is not available to Onward when the interlocutory judgmentis carefully read. The judgment does not find that IAG lacked arguable claims againstthe third parties. The judgment turns substantially on the extent to which the thirdparties would be drawn into a proceeding in which the preponderance of the trial istaken up with issues involving other parties.6 As the interlocutory judgment observes,the setting aside of the third party notices leaves IAG with its ability to bring separateproceedings against each of the third parties.7[34] The matters informing the outcome of the interlocutory application werematters of balancing and judgement and do not reflect unnecessary or unmeritoriousdecision-making on the part of IAG or its advisors.[35] Onward also asserts that increased costs are justified under r 14.6(3)(b)(v) onthe basis that IAG refused without reasonable justification to accept an offer ofsettlement (discontinuance with costs lying where they fall).[36] Onward has produced in evidence the correspondence by which it made itsproposal as to discontinuance without costs. The correspondence focuses on themodest level of involvement of Onward in the repair projects which are the subject ofthis proceeding, with Onward likely to be "dragged along for the full extent of theseproceedings when its involvement in repairs was minimal". In short, the solicitors forOnward anticipated the basis upon which the setting aside application wassuccessfully made.[37] For similar reasons to those applying under r 14.6(3)(b)(ii), I am not satisfiedthat it would be just to award increased costs by reference to IAG's refusal to acceptthe discontinuance proposal. The Court has not given judgment on IAG's claimsagainst Onward. Rather it has left IAG to pursue those claims in a separate proceeding6 Self-Realization Meditation and Healing Centre Charitable Trust (New Zealand) v IAG NewZealand Limited, above n 1, at [66].7 At [67].if at all. The observation of the Court of Appeal in Holdfast NZ Limited v Selleys PtyLimited has some resonance in this situation:8A Court cannot assume that a discontinuance is akin to judgment for thedefendant.[38] I am accordingly not satisfied that there should be an order for increased costsin favour of Onward. A calculation of costs on a 2B basis is appropriate.The costs of costs submissions[39] Counsel for Hi Tech alone seeks an item for costs relating to the costssubmissions themselves. In the case of Hi Tech, counsel's submissions were containedin one and a half pages, with relevant documents attached.[40] I do not consider it appropriate to add an item for those cost submissions. HiTech has failed to obtain the most significant outcome it was seeking, namely an orderthat fixed costs be paid now.Orders[41] I order:(a) The defendant is to pay to each of the fourth and fifth third parties theircosts of the interlocutory applications to set aside third party notices,together with disbursements, which I fix in each case at $23,826.73("the costs");(b) The costs will not become payable until further order of the Court, withleave reserved to each of the parties to apply by memorandum forfurther direction in the event no order is made in relation to these costs8 Holdfast NZ Limited v Selleys PTY Limited (2005) 17 PRNZ 897 (CA), at [29].upon the determination of the defendant's review application.Associate Judge OsborneSolicitors:Shine Lawyers, ChristchurchDuncan Cotterill, AucklandHazleton Law, WellingtonJoynt Andrews, ChristchurchRhodes & Co, Christchurch