MIDDELDORP v AVONDALE JOCKEY CLUB INCORPORATED [2021] NZCA 238

MIDDELDORP v AVONDALE JOCKEY CLUB INCORPORATED [2021] NZCA 238 [9 June 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA459/2020[2021] NZCA 238BETWEEN VINCENT JACOB MIDDELDORPAppellantAND AVONDALE JOCKEY CLUBINCORPORATEDRespondentHearing: 25 February 2021Court: Cooper, Mallon and Wylie JJCounsel: P W David QC and C D Boswell for AppellantG M Coumbe QC and D A C Bullock for RespondentJudgment: 9 June 2021 at 10 amJUDGMENT OF THE COURTA The appeal is dismissed.B The respondents are entitled to one set of costs in this Court for a standard appealon a band A basis plus any disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Mallon J)Introduction[1] This is a costs appeal. It arises in the context of a judicial review in whichVincent Middeldorp challenged three distinct decisions of the Avondale Jockey ClubInc (the Club). Ultimately, he succeeded in his challenge on one of these decisionsand obtained declaratory relief. He failed on his challenges to the other two decisions.[2] The key issue on this appeal is whether he is the successful party for thepurposes of r 14.2(1)(a) of the High Court Rules 2016. Mr Middeldorp says that he isand that the High Court erred in finding otherwise. The Club submits that it was opento the High Court Judge to hold that it was the successful party overall. It also saysthat the general principle that whoever receives relief is the successful party is notnecessarily apt for judicial review proceedings and, in any event, is not an inflexiblerule and is subject to the Court's discretion on all matters relating to costs.1[3] In considering this appeal, we repeat what this Court recently said:2[1] Questions of costs are ultimately a matter of discretion. The exerciseoften requires assessment of a wide range of factors. The overall objective isto achieve an outcome that best meets the interests of justice in the given casein accordance with any applicable costs rules and consistent with establishedprinciples. The trial judge is uniquely placed to make this assessment. It iswell-settled that an appellate court should not interfere with a costs awardunless satisfied that the judge acted on a wrong principle, failed to takeaccount of some relevant matter, factored in the irrelevant or was plainlywrong. This is why appeals against costs awards seldom succeed.The proceedingFactual background[4] Mr Middeldorp has been a member of the Club for nearly 40 years. He waselected to the Club's Committee and served on that Committee from 2013. Thejudicial review proceeding had its genesis in decisions made by the Club to address itslong-standing serious financial issues. This included a decision to close the Club'shorse training facilities, which had been available to both professional and hobbytrainers for over 70 years.[5] Mr Middeldorp was strongly opposed to the decision to close the trainingfacilities and other decisions made by a majority of the Committee members. He tooksteps to undermine those decisions, which the Club viewed as trouble-making.1 High Court Rules 2016, r 14.1.2 Kinney v Pardington [2021] NZCA 174 (footnotes omitted).Mr Middeldorp on the other hand considered he was acting in the best interests ofthe Club. Mr Middeldorp's actions led to his suspension from the Committee on twooccasions.[6] It was during the first of those suspensions that the decision to close the trainingfacility was made (unanimously by the remaining Committee members). In betweenthe first and second suspension decisions, the Committee received 14 applications formemberships from applicants whom the Committee suspected were for the purpose ofsupporting Mr Middeldorp's threat to petition a Special General Meeting to challengethe Committee's decision to close the training facilities. It wrote to those applicantsinviting them to provide their reasons for wanting to join the Club. Thirteen of theapplicants did not reply and the Committee then rejected their applications. Thefourteenth applicant did reply and expressed a commitment to the Club. However, theCommittee rejected his application on the basis that the applicant's brother had anoutstanding debt with the Club and the applicant's horse racing involvement wasassociated with his brother.[7] Subsequent to the second suspension decision, Mr Middeldorp filed hisproceeding in the High Court. It challenged the following matters relating to thegovernance of the Club:(a) the lawfulness of the Committee's decisions on 28 November 2016 and7 December 2017 to suspend him from office as a Committee memberfor the periods stated in those decisions (the suspension decisions);3(b) the Committee's decisions in July and September 2017 declining14 applications for membership of the Club (the application decisions);and(c) from 29 October 2014 until the present, the Committee had operatedwithout 10 Committee members and did not follow the retirement and3 The 28 November 2016 decision suspended Mr Middeldorp for three months and required awritten apology. The 7 December 2017 decision suspended him for four consecutive meetings.re-election rules of the Club (the Committee operational and electionrequirements).The High Court[8] The proceedings were heard by Gordon J in the High Court. She gavejudgment in favour of the Club.4 In doing so, contrary to a submission for the Club,she found that the Club was amenable to review.5 As to the three matters challenged:(a) On the suspension decisions:(i) she found in favour of Mr Middeldorp on his first cause ofaction (namely, that the Committee did not have the powerunder the Club's Rules to suspend an elected Committeemember);6(ii) she found against Mr Middeldorp on his second cause of action(breach of natural justice)7 and third cause of action(unreasonableness or error of law in the absence of any evidenceto support the decision);8 and(iii) she declined to give relief on the first cause of action for reasonsincluding that Mr Middeldorp was not seriously prejudiced bythe suspension decisions, there was no practical utility as thesuspensions had been served, and there was no future utilitybecause the Club was in the process of developing a newconstitution.9(b) On the application decisions:4 Middeldorp v Avondale Jockey Club Inc [2019] NZHC 901 [HC substantive decision].5 At [54]–[55].6 At [73].7 At [128].8 At [138].9 At [201].(i) Mr Middeldorp's cause of action was that the Committee hadfailed to act in good faith and with a proper purpose whenconsidering the applications under the Rules; and(ii) the Judge found against Mr Middeldorp because of the evidencewhich showed that the Committee had an open mind aboutadmitting new members who genuinely intended to be ongoingmembers and because the unpaid debt was a proper basis onwhich to decline membership to the fourteenth applicant.10(c) On the operational and election requirements, the Judge:(i) determined that the Rules required the Committee to have10 members and accepted that the Committee was operatingwith fewer than 10 members because it had not been possible tofill the positions;11(ii) accepted that this meant the process in the Rules for retirementand re-election could not be followed and the Club had adopteda pragmatic approach as a result;12(iii) found that it was lawful for the Committee to operate with fewerthan 10 members and to adopt the retirement and re-electionprocess it did on the basis of implied terms that were necessaryto enable the Club to function administratively; and13(iv) therefore found against Mr Middeldorp on this cause of action.1410 At [166]–[167] and [173].11 At [189].12 At [187(a)].13 At [188]–[191].14 At [192].The Court of Appeal[9] Mr Middeldorp appealed. This Court allowed the appeal in part.15 It agreedwith Mr Middeldorp that the High Court was wrong to decline relief on the first causeof action. It said a declaration would serve an important purpose: vindicatingMr Middeldorp, others adversely affected by his suspension (that is, members whohad voted for him and who were entitled to have him present and participating inmeetings), and the rule of law more generally.16[10] Mr Middeldorp's pleading sought a declaration that the 28 November 2016 and7 December 2017 decisions were made illegally and without jurisdiction and werevoid and of no effect. This Court considered the declaration should be confined torecording that the suspensions were unauthorised and unlawful. It noted that a findingthat a decision is unlawful does not automatically mean that the decision was void andMr Middeldorp did not seek to argue that decisions made by the Committee during thetwo periods of suspension were unlawful or of no effect.17 It was therefore notappropriate to declare the decisions void and of no effect.[11] Mr Middeldorp's appeal on the application decisions was dismissed. In doingso, this Court considered the issue relating to the fourteenth applicant to have beenfinely balanced because that applicant had confirmed his interest in ongoingmembership.18[12] Mr Middeldorp's appeal on the Committee's operational and electionrequirements was also dismissed. In contrast with the High Court, the Court foundthat the Committee was permitted to operate with fewer than 10 members.19In common with the High Court it considered that the Club was not permitted to adoptthe retirement and re-election process that it had.20 It declined to award relief on thatprocess because the Rules were unworkable, there had been no complaints by anyone15 Middeldorp v Avondale Jockey Club Inc [2020] NZCA 13 [CA substantive decision].16 At [44].17 At [49].18 At [66].19 At [82].20 At [83].who had missed out on election, there was no other prejudice identified, and the Clubhad now adopted a new constitution.21Outcome[13] The outcome after the appeal was that:(a) Mr Middeldorp had succeeded on his challenge to the suspensiondecisions, pursuant to one of his three causes of action, and hadobtained relief partly in the terms in which it had been sought;(b) Mr Middeldorp had failed on his challenge to the application decisions(one cause of action); and(c) Mr Middeldorp had failed to establish that the Committee acted inbreach of its Rules by operating without 10 members, succeeded inestablishing that the Committee had not followed its rules in itsretirement and re-election processes, but was declined any relief (onecause of action).The costs decisionsHigh Court decision No 1[14] Prior to the Court of Appeal decision, the High Court Judge's view was that"[o]verall, the Club was the successful party".22 This was because, althoughMr Middeldorp succeeded on some arguments (the Club's amenability to review andthe absence of a power to suspend him), he was unsuccessful in obtaining any relief.She therefore considered that the Club was entitled to an award of costs on a 2B basis.[15] The Judge then considered whether the arguments on which the Club had failedsignificantly increased Mr Middeldorp's costs or otherwise justified a reduction to theaward.23 She considered that they did, principally on the issue of the absence of a21 At [86].22 Middeldorp v Avondale Jockey Club Inc [2019] NZHC 1447 at [20] [First HC costs decision].23 High Court Rules, r 14.7(d) or (g).power to suspend Mr Middeldorp. She reduced the award by 15 per cent to reflectthis.24Court of Appeal[16] On the appeal, because the "honours were broadly even", no costs award wasmade in either party's favour.25 The Court was silent on the position concerning costsin the High Court.Negotiations[17] Mr Middeldorp was of the view that, following the appeal, he was thesuccessful party and should have a costs award, with a reduction to reflect that he hadnot succeeded on all issues. He offered to settle the issue with the Club on a costs liewhere they fall basis, which would have entitled him to a refund of the costs he hadpaid to the Club after the High Court's first costs decision. The Club did not respond,apparently due to difficulties in meeting during the COVID-19 restrictions.Mr Middeldorp therefore brought the matter back to the High Court for consideration.High Court decision No 2[18] The High Court Judge remained of the view that overall the Club was thesuccessful party.26 This was for the following reasons:27(a) On a quantitative basis Mr Middeldorp had failed on four out of fivecauses of action.(b) On a qualitative basis Mr Middeldorp had received relief on one causeof action but it was more limited in scope than that which had beensought. In the Judge's view, contrary to the submission made on hisbehalf, the unlawful suspension was not the primary cause of action.It would have been of great significance if Mr Middeldorp had24 First HC costs decision, above n 22, at [62].25 CA substantive decision, above n 115, at [91].26 Middeldorp v Avondale Jockey Club Inc [2020] NZHC 1748 [Second HC costs decision] at [15].27 At [16]–[21].succeeded on the Committee's operational and election requirements(the fifth cause of action) because the allegation was that the Committeehad operated unlawfully since October 2014.(c) This was not a case where the Court of Appeal had reversed theHigh Court judgment in its entirety. The High Court's liability findingshad been upheld and the only difference was on the exercise of thediscretion to grant relief on the first cause of action.(d) The Court of Appeal had not quashed the costs order in the High Courtand referred it back to that Court for consideration, as it could have itdone.28[19] The Judge did consider it appropriate to reduce the award she had originallymade in favour of the Club. She considered a further 10 per cent reduction wasappropriate to recognise that Mr Middeldorp's success was "slightly more" as a resultof the Court of Appeal decision than it had been when the costs award was made.29Did the High Court err as to who succeeded?[20] Rule 14.2(1)(a) of the High Court Rules provides the general principle that "theparty who fails with respect to a proceeding should pay costs to the party whosucceeds". This encapsulates the primary principle that costs follow the event unlessthere are exceptional circumstances.30 The submission for Mr Middeldorp is that,because he was successful in obtaining some relief, he is the successful party for thepurposes of r 14.2(1)(a).[21] In support of his submission Mr Middeldorp refers to two decisions.31 Bothconcern claims for damages in which the damages award to the plaintiff wassubstantially less than the sum claimed. In those decisions this Court overturned28 Court of Appeal (Civil) Rules 2005, rr 48(4) and 53J.29 At [23].30 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].31 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 (leave to appeal dismissed:Midgen Enterprises Ltd v UV Water Systems Ltd [2017] NZSC 68); and Weaver v AucklandCouncil [2017] NZCA 330, (2017) 24 PRNZ 379.decisions of the High Court that had declined awards of costs to the plaintiff becauseof their limited success. In doing so, it reiterated that the unsuccessful party is theparty adjudged liable to pay money to the other.32 The fact that the party had lesssuccess than claimed is considered under r 14.7 of the High Court Rules, which givesthe Court the discretion to reduce the award of costs or refuse to make an award.[22] Outside of a damages claim, it can sometimes be more difficult to identify awinner. An example is Packing In Ltd (in liq) v Chilcott.33 This involved anapplication to set aside notices issued by the liquidators under s 294 of the CompaniesAct 1993 in relation to 14 voidable transactions. The affirmed notices representedmore than half of the overall value of the transactions covered by the notices.This Court considered that success or failure was better assessed by a realisticappraisal of the end result.34[23] Another example is Okey v Kingsbeer.35 The substantive proceeding was anapplication under the Property Law Act 2007 for an order extinguishing an equitablegrant of easement or, in the alternative, an order that the respondent was to bear thecosts of bringing the access up to standard. After an appeal to this Court, theapplication to extinguish the easement failed and an order was made directing that therespondent was to meet 75 per cent of the upgrade costs and the applicant was to meetthe balance.[24] The High Court considered it was not straightforward to determine who wasthe successful party because the application to extinguish the easement was the mainissue of fact and law, but the applicants had succeeded on their alternative and hadreceived a costs order greater than that which they had offered prior to trial. Standingback, the Judge considered the applicants were the successful party but the costs awardshould be reduced by 50 per cent because of their lack of success on the main causeof action.3632 Water Guard NZ Ltd v Midgen Enterprises Ltd, above n 31, at [13]; and Weaver v AucklandCouncil, above n 31, at [20] and [26].33 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA), discussed in Weaver v AucklandCouncil, above n 31, at [22]–[25].34 At [6].35 Okey v Kingsbeer [2017] NZCA 625, (2017) NZCPR 25.36 Kingsbeer v Okey [2018] NZHC 3309 at [20]–[23].[25] An appeal by the respondent, based on the contention that it was thesubstantially successful party, was dismissed.37 The Court considered there had beenno error in the approach taken in the High Court, saying:[14] This was one of those cases in which the High Court was justified inconsidering not only which party won the principal contest at trial, but alsomaking a realistic overall appraisal of the end result. We endorse the approach[the High Court Judge] followed and the result he reached.[26] In this case there were, in effect, three judicial review proceedings rolled intoone claim because Mr Middeldorp challenged three distinct matters and sought threeseparate and distinct declarations. He succeeded on one of these challenges and failedon the other two. We consider that in a case like this, it was open to the Judge to viewthe Club as the successful party. On a realistic appraisal, the Club had greater successthan Mr Middeldorp because it had successfully resisted relief in relation to two of thechallenged matters and Mr Middeldorp had succeeded in obtaining relief on only theone.[27] We acknowledge Mr Middeldorp's submission that, on the one matter onwhich he succeeded, there were two unlawful decisions. However, that does not meanthat he and the Club were equally successful overall. On that argument, the Club wassuccessful on the 14 applications for membership that were challenged. The reality isthat the two suspension decisions raised a single issue (where there was a power tosuspend) and Mr Middeldorp failed on his other two causes of actions relating to thosesuspension decisions. It is appropriate in these circumstances to focus on the successor failure on the three distinct matters that were challenged, rather than to carve themup in more minute detail.[28] We also acknowledge Mr Middeldorp's point that the vindication he receivedthrough the declaratory relief on the suspension decisions was of significance to him.But the same is true of the Club's vindication on the other two issues through itssuccess in opposing the award of any relief on these issues.37 Okey v Kingsbeer [2019] NZCA 419.[29] Lastly, we reject Mr Middeldorp's submission that the Judge's approachamounts to tearing up the rules on costs and is inconsistent with the predictability thatthose rules are intended to provide. The successful party in judicial reviewproceedings involving one decision, or several decisions of the same kind, willnormally be the party who either obtained relief or resisted it. But there can be otherconsiderations at play. For example, if the proceeding is in the public interest,38 theremay be no award of costs against an unsuccessful plaintiff and it is rare for costs to beawarded against a judicial body whose decision is the subject of the review.[30] Returning to the approach on costs appeals quoted earlier, "[t]he overallobjective is to achieve an outcome that best meets the interests of justice in the givencase in accordance with any applicable costs rules and consistent with establishedprinciples".39 In a case where there were, in effect, three judicial review proceedingscombined into one, it was consistent with r 14.2(1)(a) and the interests of justice toview the Club as the overall successful party, as it succeeded on two of the claims andlost on just on the one.[31] It follows that we reject Mr Middeldorp's submission that the Judge erred inlaw and principle and was plainly wrong in finding that the Club remained thesuccessful party following the appeal. That was the only ground of appeal.Mr Middeldorp did not challenge the size of the Judge's reduction if that ground failed.It would of course have been difficult to do so given the advantages the Judge hadover this Court as to the relative time involved in, and significance of, the respectiveclaims.Result[32] The appeal is dismissed.[33] The respondents are entitled to one set of costs in this Court for a standardappeal on a band A basis plus any disbursements.Solicitors:Wilson Harle, Auckland for AppellantLeeSalmonLong, Auckland for Respondent38 High Court rules, r 14.7(e).39 Kinney v Pardington, above n 2, at [1].