Bilkey v Kyriak [2021] NZCA 518 (8 October 2021)

Last Updated: 12 October 2021

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA298/2021 [2021] NZCA 518

	BETWEEN	ROBERT MACKENZIE BILKEY, LYNNETTE MARGARET BILKEY AND HAURAKI TRUSTEE SERVICES (2008) LTD Applicants
	AND	MICHAEL THOMAS KYRIAK AND CHRISTINA MOIRA JUDITH CIE Respondents

Court:	Cooper and Brown JJ
Counsel:	W A McCartney for Applicants Respondents in Person
Judgment: (On the papers)	8 October 2021 at 2.30 pm

JUDGMENT OF THE COURT

A The application for leave to appeal is declined.

2. The applicants must pay the respondents costs for a standard application on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Cooper J)

Introduction

• [1] The applicants, Mr and Mrs Bilkey,^[1] seek leave pursuant to s 60(1) of the Senior Courts Act 2016 to appeal against a decision of the High Court delivered by Lang J on 25 February 2021.^[2] The High Court decision was on an appeal against an award of costs made in favour of the respondents by the District Court following determination of a dispute between the neighbours effectively about a letterbox and a fence.
• [2] Judge Cunningham held that Mr Kyriak and Ms Cie, having been successful, should be awarded costs, but she reduced the award by 50 per cent to reflect the fact that they had failed to succeed on one cause of action in respect of which the evidence had occupied a considerable amount of time at the trial.^[3]

Background

• [3] The immediate genesis of the dispute was accidental damage caused by a building contractor engaged by Mr and Mrs Bilkey to a pillar containing the letterbox used by Mr Kyriak and Ms Cie at the top of a shared entrance to their properties. The damaged pillar was replaced, but the letterbox was not.
• [4] This led to litigation in which Mr Kyriak and Ms Cie advanced four causes of action. Three causes of action related to an implied entitlement to use a letterbox at the top of the driveway; the fourth cause of action related to a boundary fence between the properties.
• [5] The proceeding resulted in a trial before Judge Christiansen in the District Court at Auckland which occupied three and a half days of hearing time and was spread over a week in December 2019. Mr Kyriak and Ms Cie were successful on the three causes of action relating to the letterbox. But the Judge dismissed the claim relating to the fence on the basis that the existing fence could be repaired and did not require replacement.^[4] The Judge also considered that Mr Kyriak and Ms Cie should meet most of the costs of rectifying the defects of the existing fence.^[5]
• [6] Mr and Mrs Bilkey then sought to appeal against the judgment of the District Court. When the appeal came on for hearing, however, Mr and Mrs Bilkey had sold the property they owned and their successors had agreed to grant Mr Kyriak and Ms Cie a registered easement permitting them to place and maintain a letterbox at the top of the driveway in the same location as the original letterbox. In the circumstances, against the opposition of the Bilkeys, Davison J dismissed the appeal on the ground that the issues raised were moot.^[6]
• [7] The costs payable on the District Court proceedings had at that stage not been determined. That occurred on 26 August 2020.^[7] As mentioned above, in the costs judgment, while holding Mr Kyriak and Ms Cie had been successful in the proceeding, Judge Cunningham nevertheless deducted from the costs otherwise payable to them a sum of 50 per cent to reflect their lack of success on the issue concerning the fence, which had occupied nearly one half of the hearing time in the District Court. A further deduction of five per cent was made to reflect the failure of Mr Kyriak and Ms Cie to comply with discovery obligations, and also to reflect an unsuccessful late application to add a further cause of action in defamation.^[8]
• [8] Mr and Mrs Bilkey then appealed to the High Court advancing three grounds. They were first that the Judge erred in fixing the costs payable to Mr Kyriak and Ms Cie without setting those costs off against the costs payable to Mr and Mrs Bilkey on the cause of action relating to the fence. Secondly, it was argued that Mr and Mrs Bilkey were entitled to costs, or a further reduction of costs, because Mr Kyriak and Ms Cie failed to accept a reasonable settlement offer prior to trial. Finally, it was said the Judge ought to have reduced the costs payable to Mr Kyriak and Ms Cie by more than five per cent to reflect their failure to comply with discovery obligations.^[9]
• [9] Lang J rejected these arguments. He was satisfied that the Judge properly reduced the costs that would otherwise be payable to reflect the fact that the Bilkeys had successfully defended part of the claim. He considered this was an orthodox application of the principles set out in r 14.7(d) of the District Court Rules 2014 (the Rules), which provides that costs may be refused or reduced when the party who has been successful overall nevertheless fails in relation to a cause of action or issue that significantly increased the costs of the unsuccessful party.^[10]
• [10] As to the second issue, after reviewing the correspondence that had passed between the parties, the Judge determined that the pre-trial offers of settlement made by Mr and Mrs Bilkey did not meet the requirements of rr 14.10 and 14.11 of the Rules.^[11] The offers were expressly stated to be open letters and not without prejudice save as to costs and, in addition, the letters had been produced at trial.^[12] However, he noted that under r 14.7(e)(v), the District Court is permitted to refuse to make an order for costs, or to make an order for reduced costs, where the successful party has without reasonable justification refused an offer of settlement. He noted that the rule applies both to offers made under r 14.10 — written offers without prejudice except as to costs — and other offers to settle or dispose of the proceeding.^[13]
• [11] Lang J considered that Mr Kyriak and Ms Cie were left in a worse position following the hearing than they would have been if they had accepted Mr and Mrs Bilkey’s offer in relation to the fence. However, he noted that the test under r 14.7(e)(v) is not the same as that under rr 14.10 and 14.11, namely whether the party declining the offer is effectively in a worse position following judgment than would have been the case if the offer was accepted. Rather, r 14.7(e)(v) requires consideration of whether the party failed without reasonable justification to accept the offer. In all the circumstances, the Judge decided that Mr Kyriak and Ms Cie had a reasonable justification for rejecting the offers and he was satisfied that the costs awarded to Mr Kyriak and Ms Cie should not be further reduced to reflect the fact that they had rejected the offers.^[14]
• [12] Finally, Lang J considered whether the five per cent reduction applied by the District Court was insufficient in respect of the other matters raised. He rejected the arguments advanced by the Bilkeys on the basis that the approach taken by the Judge was a valid exercise of judicial discretion and did not warrant appellate intervention.^[15] Lang J also rejected an argument that there should have been a greater reduction in costs to reflect the fact that Mr Kyriak and Ms Cie had not complied with the terms of the interim injunctive relief granted at an earlier stage in the dispute.^[16]
• [13] For these reasons the Judge dismissed the appeal and expressed a tentative view that costs should be awarded on a category 2 band B basis, together with disbursements as fixed by the Registrar.^[17]

High Court leave judgment

• [14] Mr and Mrs Bilkey then sought leave from the High Court to appeal to this Court from Lang J’s decision. Lang J rejected this application on 29 April 2021.^[18]
• [15] The leave application identified two issues for determination by this Court. The first was whether, for the purpose of fixing costs following trial, a pre-trial open offer of settlement should be treated at least as favourably as an offer made without prejudice except as to costs. The second issue was, broadly, “[h]ow costs should be awarded where opposing parties each succeed on distinct and unrelated issues”.^[19]
• [16] Lang J reiterated his view that the offers made by the Bilkeys could not be taken into account under r 14.10 (the relevant rule as to written offers without prejudice except as to costs) as they did not meet the requirements of that rule. He considered his decision on this issue applied the wording of r 14.10 in an orthodox way on the basis that the offers made by the Bilkeys were open offers and not marked “without prejudice save as to costs”.^[20] Further, offers such as those in fact made could be taken into account under r 14.7(e)(v). But on the facts of the case, he had not considered the pre-settlement offers justified a further reduction of costs beyond that ordered in the District Court.^[21]
• [17] In the circumstances, Lang J was not satisfied that the first proposed question raised any issue of law of sufficient general or public importance to justify the time and further expense involved in an appeal to this Court.^[22]
• [18] As to the second issue, the Judge noted that the ultimate approach taken by Judge Cunningham in awarding costs involved an orthodox application of the principles contained in r 14.7(d) of the Rules. The Judge remained of that view and did not consider the point Mr and Mrs Bilkey sought to raise on a second appeal was reasonably arguable.^[23]
• [19] Lang J then identified a further reason to decline to grant the application for leave to bring a second appeal. This part of the leave judgment was headed “[e]nough is enough”. The Judge recorded his view that, when looked at objectively, the subject matter of the substantive proceeding was a trivial dispute between neighbours that should never have come before the courts. He continued:^[24]

It has already required a disproportionate commitment of judicial and institutional resources. The only matter now outstanding is a costs award amounting to approximately $24,000. I do not consider there is any justification for devoting more resources to that issue.

• [20] In a following paragraph, the Judge noted that the litigation involved in this dispute had begun in the Disputes Tribunal and been before the courts for six years, which had included a substantive hearing spread over a week in the District Court. The Judge concluded:

[21] Enough is now enough. I suspect the litigation costs Mr and Mrs Bilkey have incurred over the last six years would have built several fences, gates and letter boxes. The inevitable cost and delay involved in a further appeal to the Court of Appeal solely on the issue of costs is plainly not justified. The parties and the courts now need to move on to more worthwhile and cost-effective endeavours.

Application for leave to bring a second appeal

• [21] The application for leave to appeal to this Court is advanced on the basis that the proposed appeal would involve issues of general importance sufficient to outweigh the costs and delay of a further appeal. These issues are said to be:

(a) That open offers of settlement ought to have the same effect on costs as offers made without prejudice except as to costs.

(b) That the conventional method by which costs are awarded when both parties succeed is flawed, and unfair to a party who is deemed to have succeeded less, even if only marginally less. It is said that there is no principled reason why an open offer of settlement should not be treated, for the purposes of costs, at least as favourably as an offer without prejudice except as to costs. It is further contended that the starting point for an award of costs should be that each side had approximately equal success and failure, with any appropriate adjustments made from there. Determining net costs payable on this approach would involve calculating the costs applicable to each party on the issues on which they had succeeded, with a set off reflecting the other side’s success.

• [22] The relevant test for leave to bring a second appeal remains that set out in Waller v Hider.^[25]
• [23] In order for there to be a grant of leave for a second appeal, the proposed appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal. Not every alleged error of law is sufficiently important to justify further pursuit of litigation which has already been twice considered and ruled upon by a court.^[26]
• [24] We are satisfied that this application does not meet the test in Waller v Hider. It is clear that by this application the Bilkeys are simply attempting to relitigate a straightforward determination as to costs which has now been considered once in the District Court and twice in the High Court. It is simply not the case that an issue has been identified of sufficient importance to outweigh the costs, to both the court system and the parties, of a further appeal.
• [25] Since the settlement offers were not made without prejudice except as to costs, their impact was not to be assessed under rr 14.10 and 14.11 of the Rules. Rather, the impact of what were open offers of settlement had to be assessed under r 14.7. Lang J’s judgment to that effect cannot be faulted: there is no construction of the Rules capable of bona fide and serious argument to the contrary.
• [26] The impact on costs due to the fact that Mr Kyriak and Ms Cie were only partially successful in their litigation before the District Court was a matter for assessment at first instance. We do not consider any error of principle has been identified in the approach taken on that issue either in the District Court or by Lang J in the High Court. The issue is inherently unsuitable for consideration in a second appeal.
• [27] We note that Mr and Mrs Bilkey have taken exception to observations made by Lang J in the leave judgment under the heading “[e]nough is enough”. They complain that they tried to settle the proceeding before the trial began in the District Court and that they should not be considered responsible for the costs and delays that occurred when their settlement offers were rejected.
• [28] However, we consider the Judge’s observations were justified having regard to the basic subject matter of the dispute. We agree that it would have been much better if the parties had found a way to settle the dispute. The Judge’s comments were made in the context that resolution of the dispute had involved a three and a half day hearing before the District Court spread over five days, an appeal to the High Court (rendered moot), a separate appeal to the High Court on questions of costs, and an application for leave to appeal from that decision. Lang J’s comments were justified and apt having regard to what happened over the course of the litigation as a whole. They have been rather underlined by the fact that a further application for leave to appeal has been made to this Court.

Result

• [29] The application for leave to appeal is declined.
• [30] The applicants must pay the respondents costs for a standard application on a band A basis and usual disbursements.

Solicitors:
DK Law, Auckland for Applicants

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^[1] For simplicity we refer throughout to the Bilkeys without adding an unnecessary reference to Hauraki Trustee Services (2008) Ltd.

^[2] Bilkey v Kyriak [2021] NZHC 264 [High Court judgment].

^[3] Kyriak v Bilkey [2020] NZDC 16722 [Costs judgment].

^[4] Kyriak v Bilkey [2019] NZDC 25227.

^[5] At [50].

^[6] Bilkey v Kyriak [2020] NZHC 1264 at [29]‑–[33].

^[7] Costs judgment, above n 3.

^[8] At [58], [60] and [62].

^[9] High Court judgment, above n 2, at [13].

^[10] At [21]–[22].

^[11] At [41].

^[12] At [40]–[41].

^[13] At [42].

^[14] At [49]–[50].

^[15] At [53].

^[16] At [55].

^[17] At [58].

^[18] Bilkey v Kyriak [2021] NZHC 927 [High Court leave judgment].

^[19] At [5].

^[20] At [8] and [10].

^[21] At [9].

^[22] At [10].

^[23] At [16].

^[24] At [17].

^[25] Waller v Hider [1997] NZCA 221; [1998] 1 NZLR 412 (CA).

^[26] At 413.