STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2018] NZHC 1252

STYLO MEDICAL SERVICES LIMITED v HUM HOSPITALITY LIMITED [2018] NZHC 1252 [31 May 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-600[2018] NZHC 1252UNDER the Property Law Act 2007IN THE MATTER of an application under section 261 for reliefagainst refusal to renew a leaseBETWEEN STYLO MEDICAL SERVICES LIMITEDPlaintiffAND HUM HOSPITALITY LIMITEDDefendantHearing: On the papersCounsel: R O Parmenter for plaintiffM Eastwick-Field and C E Grenfell for defendantJudgment: 31 May 2018JUDGMENT OF KATZ J[Costs]This judgment was delivered by me on 31 May 2018 at 10:30am pursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarSolicitors: Winston Wang & AssociatesRussell McVeagh, AucklandCounsel: R O Parmeter, Barrister, AucklandIntroduction[1] On 11 April 2018, I delivered my decision in relation to this matter. I allowedHum Hospitality Limited's ("Hum") application for relief against Stylo MedicalServices Limited's ("Stylo") refusal to renew its lease.1[2] Hum seeks costs and disbursements in respect of its successful application. Itseeks $10,369.50 for costs on a 2B basis, and $10,287.05 plus GST for disbursements.Costs[3] The parties have agreed that Stylo will pay Hum's costs on a 2B basis, as setout below:Item Steps for application for relief under s 261 of theProperty Law Act 2007Allocated days11 Filing memorandum for first or subsequent casemanagement conference or mentions hearing (x2)0.812 Appearance at mentions hearing or callover (x2) 0.422 Filing interlocutory application 0.624 Preparation of written submissions 1.525 Preparation by applicant of bundle for hearing 0.626 Appearance at hearing of defended application forprincipal counsel0.75Total claimed days:Subtotal (at $2,230 per day)4.65$10,369.501 Stylo Medical Services Ltd v Hum Hospitality Ltd [2018] NZHC 642.Disbursements[4] In relation to disbursements, the parties cannot agree. In its costs memorandumof 27 April 2018, Hum seeks the following disbursements:Disbursements Fees1 Engagement of Heidi van Eeden, VeronBuilding Consultants Limited$3,877.75 plus GST2 Engagement of Nigel Emmitt, EmmittConsultants Limited$3,500.00 plus GST3 Engagement of Frank Micallef, FireEngineer, Chester$2,909.30 plus GSTSubtotal: $10,287.05 plus GST[5] Stylo's costs memorandum of 3 May 2018 does not engage with Hum's costsmemorandum. Instead it responds to an earlier Russell McVeagh letter of 20 April2018 in which disbursements of $18,119.19 were sought. That claim, however, wasnot pursued in Hum's costs memorandum of 27 April 2018. Rather, a reduceddisbursement sum of $10,287.05 plus GST is sought. The discrepancy is attributableto greater sums previously being claimed in relation to each expert witness identifiedin the above table. In addition, it appears that a disbursement was also previouslysought for the services of James Kidd (an accountant) of K H Consulting Ltd. That isno longer sought.[6] I proceed on the basis of the reduced sum now claimed by Hum. I considerthe submissions of Mr Parmenter, for Stylo, insofar as they are relevant to Hum'supdated disbursements schedule.Relevant law[7] An expert witnesses' expenses must be approved by the Court to be claimed.2The witnesses' disbursement, if claimed and verified, must be included in the costsaward to the extent that it was specific to the conduct of the proceeding, necessarilyincurred and reasonable in amount.3Should Mr Micallef's first invoice be included as a disbursement?[8] Mr Parmenter submits that Mr Micallef was consulted by Hum for the expresspurpose of dealing with a Notice to Fix that was issued by the Auckland Council inrelation to the leased property. Mr Parmenter submits that the first invoice fromMr Micallef was concerned with the Notice to Fix, and not with the litigation betweenthe two parties. On that basis, he submits Stylo should not have to pay those fees(which amount to $2,300 (GST included)). He accepts the fees in Mr Micallef'ssecond invoice, which relate to Mr Micallef reviewing his affidavit and signing it.Therefore, Mr Parmenter submits Stylo should only have to pay the fees in the secondinvoice, in the sum of $1,045.70 (GST included).[9] Hum submits that it needed to rely on Mr Micallef's assessment to establishthat Hum was using the premises lawfully, and failing to produce that report wouldhave prejudiced its application against Stylo as it needed to establish its lawful use ofthe premises to support its "good tenant" status.[10] The Notice to Fix was issued by the Auckland Council on 30 May 2017. Inthe notice of opposition by Stylo against Hum's application for relief, dated 22 June2017, Stylo submitted that Hum was using the leased property as a "crowd small"premises, which was in breach of the Building Act 2004 as it was only allowed to beused as a "single sleeping home". This was the same breach said to have occurred inthe Notice to Fix issued by the Auckland Council.2 High Court Rules 2016, r 14.12(2)(a). This is on the basis that expert costs do not fall within anyof the categories within r 14.12(1)(b).3 High Court Rules 2016, r 14.12(2)(b)–(d).[11] Mr Micallef was engaged by Hum to undertake a fire engineering assessmentof Hum's use of the premises by way of a report that addressed the Notice to Fix. Hisaffidavit, sworn 7 July 2017, annexed the report he had provided, in which he opinedthat there was no change of use of the premises, and therefore no breach of theBuilding Act.[12] Ms Armitage, of Hum, later provided an updating affidavit, sworn19 September 2017, which showed that the Auckland Council considered the Noticeto Fix was being complied with as a result of a change of use to the property beingpermitted.[13] The Notice to Fix was issued after the proceeding commenced. Stylo put it inissue by claiming that Hum was a bad tenant because (amongst other things) its use ofthe building was unlawful. Mr Micallef's report was relevant to this point as itaddressed whether Hum's use was in breach of the Building Act. In that sense,Mr Micallef's fees were specific and relevant to the proceeding. His report wasrelevant to Hum's defence against Stylo's claim that it was a bad tenant. Further, inorder for Mr Micallef's later fees relating to the signing of his affidavit to be incurred,he needed to have evaluated the building and assessed whether it complied in order toprovide his opinion. I therefore consider his fees included in both invoices areproperly claimable as disbursements. I am also satisfied that his fees are reasonablein amount.Should Mr Emmitt's expenses be included as a disbursement?[14] Mr Parmenter submits that Mr Emmitt's involvement was completelyunnecessary. Mr Parmenter submits that it was not reasonable to have two quantitysurveyors provide affidavits for Hum, especially when one, Ms van Eeden, wascritiquing Mr Emmitt's earlier assessment. Ms van Eeden compared the valuationsgiven by Mr Emmitt and by Mr Nixon (the quantity surveyor for Stylo) in 2014.Mr Parmenter also submits that it is relevant that it was agreed that a court-appointedquantity surveyor would consider the differences between Mr Emmitt and Mr Nixon'sassessments and provide his own report.[15] Ms van Eeden's affidavits, and the valuations attached to them, were basedsolely on the valuations performed by Mr Emmitt and Mr Nixon (the quantity surveyorfor Stylo) in 2014. In her reply affidavit, affirmed 10 July 2017, Ms van Eeden statesthat her report "should be read as providing [her] opinion only of the value of worksundertaken as at the dates of Messrs Nixon's and Emmitt's affidavits" from 2014.[16] Mr Emmitt had valued the investment as being $659,000 in 2014.Mr Emmitt's latest valuation, dated 6 July 2017, valued Hum's investment as$694,000.[17] Hum did not refer to Ms van Eeden's evidence at all in its submissions for thesubstantive hearing. It is not surprising therefore, that her evidence was not referredto in my Judgment. Rather, I referred to Mr Emmitt's 6 July 2017 valuation. I alsoreferred to Mr Nixon's valuation of $94,253 (plus GST). As noted by Mr Parmenter,I ultimately relied on the Court-appointed quantity surveyor's (Mr Hanlon's) opinion,given the discrepancy between Mr Emmitt and Mr Nixon's assessments.[18] In these circumstances, while Mr Parmenter submits that he accepts Ms vanEeden's costs, and contests Mr Emmitt's, I consider that it is Ms van Eeden's expensesthat were unnecessary for the proceeding. Mr Emmitt's report, on the other hand, wasspecific and necessary for the proceeding, particularly given Mr Hanlon's reference toit. I am also satisfied that his claimed expenses are reasonable. I therefore considerthat Mr Emmitt's costs may be claimed as disbursements, but Ms van Eeden's maynot.Should GST be included in the order for disbursements?[19] While this issue has not been raised by either party, an award of disbursementsshould not include GST if the successful party is GST registered.4 There is noevidence regarding whether Hum is GST registered, but given its status as a company,I would assume that it is. Based on that assumption, the disbursements claimed shouldnot include GST.4 New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282, (2016)27 NZTC 22-058 at [13]; [17].Result[20] I order that Stylo pay costs to Hum in the sum of $10,369.50, together with(GST exclusive) disbursements of $6,409.30 (totalling $16,778.80). In the event thatHum is not GST registered, I direct that it is entitled to also recover the GSTcomponent of Mr Emitt's and Mr Micallef's fees.__________________________Katz J