ALISTAIR JOHN DUGALD CAMERON V WESTLAND DISTRICT COUNCIL HC CHCH CIV 2009 418 000026 [2009] NZHC 1459 (22 October 2009)

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
                                                                CIV 2009 418
000026



               BETWEEN                    ALISTAIR JOHN DUGALD CAMERON
                                          Plaintiff

               AND                        WESTLAND DISTRICT COUNCIL
                                          Defendant


Hearing:
      19 October 2009

Appearances: S M Dwight for Plaintiff
             B M Russell for Defendant

Judgment:      22 October 2009


               JUDGMENT OF ASSOCIATE JUDGE OSBORNE
                             As to Costs




Introduction


[1]    To ensure
that its lease of a gravel quarry was not terminated by the
defendant, the plaintiff in March 2009 brought an originating application
for relief
against a proposed cancellation of its lease. The plaintiff has since decided to
discontinue the proceeding having regard
to the fact that the term of the lease expired
in August 2009 and having regard to a tentative arbitration arrangement for resolving
the money issues between the parties.


[2]    The plaintiff sought costs on a 2B calculation amounting to $6,560.00 (with
filing
fee of $400.00). I heard argument today from counsel over that issue. The
argument took something over 1 hour and a quarter. The
Court is obliged to deal
with this matter judicially but I am constrained to record the serious concern of the
Court that the parties,
with the assistance of counsel, were not able to resolve without

ALISTAIR JOHN DUGALD CAMERON V WESTLAND DISTRICT COUNCIL HC CHCH
CIV 2009 418
000026 22 October 2009

further Court intervention an issue of this modest value. The continuing debate
between and
involvement of solicitors has self-evidently involved time and may well
have involved expense. It has also involved the Court in
allocating scarce judicial
resource.


What was this case really about?


[3]    Section 253 Property Law Act 2007 allows lessees
to apply to the Court for
relief against a cancellation or proposed cancellation of a lease on the grounds of
breach of covenant
or condition.


[4]    The defendant issued a Property Law Act Notice (under s246 of the Act) in
February 2009. The plaintiff disputed
the validity of the notice. Correspondence did
not resolve the dispute. On 5 March 2009 the defendant's solicitor notified the
plaintiff's
solicitor that if the plaintiff was genuinely challenging the defendant's
right to cancel the lease, the plaintiff ought to apply
to the Court for relief under s253
of the Act.


[5]    The letter implicitly threatened cancellation of the lease if a s253 application
was not made.


[6]    Faced with this situation, the plaintiff's solicitor prepared an application and
a lengthy supporting affidavit
which were filed in the Greymouth Registry on
11 March 2009. The Registry allocated 12 May 2009 as the first call date.


[7]   
The defendant did not file a notice of opposition in the time required. Rather,
the defendant's solicitors faxed a copy of a notice
of opposition to the Court literally
the evening before the hearing. Counsel acknowledged that the notice of opposition
was late
but explained that he had "assumed that a consent order could be negotiated
and a notice of opposition would not be necessary". The
concept of the consent
order referred to was apparently an order requiring the parties to resolve their dispute
through an arbitration
process. The notice of opposition stated that the substantive
dispute between the parties had been referred to arbitration and asserted
that the s253
notice had been valid. The notice of opposition did not refer to any affidavit

evidence nor was any filed at the
time. For the purposes of the costs hearing I have
been provided with correspondence which occurred between the parties in the week
leading up to the 12 May 2009 hearing.              The plaintiff's position in that
correspondence was that he would have agreed
to a resolution package involving
arbitration provided a payment of costs of $3,500.00 was made by the defendant
prior to the 12 May 2009 hearing. It was not. Instead
the defendant's solicitors
stipulated for a reservation of costs.


[8]    In the event, on 12 May 2009, and presented with a consent
arrangement
involving an adjournment with the likelihood of an arbitration process, I adjourned
the proceeding by consent to 10 June
2009 with costs of the appearance that day
fixed on a 2B basis and ordered to be costs in the cause. I indicated to counsel that
in the event the ultimate resolution between the parties was that the plaintiff's
occupation was to continue then the defendant would
pay the costs to the plaintiff


[9]    Before the 10 June 2009 hearing, the parties agreed on an arbitration process,
which was
expected to take up to three months. The proceeding was adjourned to
the List on 5 October 2009 on that basis.


[10]   In the meantime,
the ten year term of the lease expired on 31 August 1999,
with the plaintiff as lessee not renewing the lease. This proceeding was
therefore
rendered otiose and on 5 October 2009 counsel for the plaintiff indicated to the Court
that the plaintiff no longer wished
to proceed with the application but needed the
issue of costs to be dealt with. Effectively, therefore, the plaintiff was signalling
an
intention to discontinue but sought to have costs awarded in his favour on a 2B basis.
The defendant opposed an award of costs
and says that if there is an order for costs it
should be on 1A basis only.


Should costs follow the event? ­ What is the "event"?


[11]   For the defendant Mr Russell submits that there has been no "event". He
refers to authorities which indicate that determining
the outcome or "event" requires
consideration of which party won the principal contest of law and fact.              He
characterises
the principal contest as being the underlying dispute as to unpaid rent

or royalties. He relates that to the validity of the Property
Law Act Notice and the
application for relief.


[12]    Mr Russell then says that there cannot be a fair determination on the question
as to costs as this point because what he describes as "the underlying dispute as to
unpaid rent and royalties" has not been conclusively
resolved.


[13]    The defendant's position on costs incorrectly assumes a direct relationship
between the underlying issues which
led the parties into dispute with the defendant's
selection of a procedure for the resolution of that dispute.


[14]    The dispute
as to rental and royalties had arisen in 2004. It began with a
letter from the respondent's agent to the plaintiff in March 2004
when the defendant
identified what it considered the "patently uneconomic" nature of its quarry leases
and proposed a new set annual
charge. The plaintiff immediately objected and
requested arbitration in regard to the proposed charge. The defendant replied with
further suggestions as to a "variation of the lease" with a proposed increased royalty
and a lower but still much increased rental.


[15]    Under the lease agreement, there was a fundamental problem with an
increased royalties in the absence of an agreement to
vary the lease ­ cl 6(5) of the
lease allowed a review of royalties, but not beyond the amount of any increase
payable by the lessor
under its mining licence. There has never been any suggestion
from the defendant that the royalty increase it was proposing was within
that limit.


[16]    In the months that followed the plaintiff indicated he was prepared to
negotiate an increased rental, but did
not accept the level of increase proposed. He
reiterated from time to time his desire for arbitration (as provided for in cl 6(4)
of the
lease). From October 2005 the defendant's agent started issuing invoices for "annual
fee" and for royalties based on what
the defendant's agent wanted. The plaintiff
challenged the invoices as the figures referred to had never been agreed (or set at
arbitration).
  The plaintiff was clearly correct in his position and Mr Russell
appearing for the defendant before me did not suggest otherwise. The plaintiff
continued to refer the defendant to the requirements of arbitration and the defendant

ignored the requests. A point was reached
in June 2006 where the defendant's agent
purported to cancel the lease for non-payment of rental. The plaintiff's solicitor
responded
asserting that the purported termination of the lease was unlawful and that
the lease required matters referred to arbitration. The
defendant's solicitors then
issued a Property Law Act Notice demanding payment of $3,161.25 upon the basis
of the defendant's calculated
rental and royalties. The plaintiff, not accepting the
calculation but feeling he had no option but to pay the sum to ensure continued
access to the quarry, paid the sum without prejudice to his contractual rights
including to arbitration.    The defendant recommenced
issuing invoices for its
calculation of royalty. The plaintiff's solicitors in August 2006, in the absence of
progress in resolving
the dispute, formally notified referral of the dispute to
arbitration. By October the parties had agreed to appoint Mr Gerald Nation
as
arbitrator, and he indicated he was prepared to be appointed arbitrator. The parties
agreed in December 2006 on his cost structure.


[17]   The parties then embarked on another period of dispute, this time over access
to information, with the plaintiff demanding
further information (including through
the Ombudsman) before being prepared to proceed further with the arbitration. This
carried
through 2007 and 2008 with the defendant continuing to send invoices at its
calculated amount. The plaintiff tendered payments for
what he considered to be the
correct amounts.


The Property Law Act Notice


[18]   On 23 February 2009 the defendant's solicitors
issued the Property Law Act
Notice which is the subject of this application.


[19]   The Property Law Act Notice alleged that the
plaintiff had breached the
covenants of the lease by failing to pay rent and by failing to pay royalties. The
overdue rent was stated
to be $1,996.87; the overdue royalties $7,969.49.


[20]   Ms Dwight takes issues with the adequacy of the notice having regard to
the
fact that neither the notice nor any covering correspondence provided any
breakdown to explain the method of calculating the
two figures. The criticism of the

notice is justified in that, against the background of the disputes which had been
taking place,
the situation called for some adequate explanation of the calculations
which led to the demanded figures. Significantly, by the time
this matter came to its
costs hearing before me, the defendant despite requests had still not provided to the
plaintiff a breakdown
of the figures which reconciled with the figures in the notice.


[21]   But the content of the notice, while of valid concern, is
less significant than
the absence of any legal merit of the claims contained in the notice. In the absence
of agreement or of an
arbitration award, the defendant had no legal justification for
presenting its demands as existing contractual entitlements, let
alone threatening that
if the demands were not met cancellation of the lease would occur. The defendant
chose to embark upon a course
which was legally ill-founded.


[22]   Mr Russell, for the defendant, sought to justify the content of the Property
Law Act Notice
by reference to delays in the arbitration process which he attributed
to the plaintiff. He relied particularly upon a 6 March 2007
email from the plaintiff's
solicitors in which it was emphasised that as soon as Mr Cameron received the
documents he was requesting
the arbitration could be moved forward. Mr Russell
characterised this as "Mr Cameron's refusal to arbitrate". That is not in fact
what
Mr Cameron's position was ­ his position was that he would arbitrate but he wished
to receive what he considered to be relevant
documentation before proceeding with
the arbitration itself. The parties had already agreed on the arbitrator. But building
on top of the attribution of blame
to the plaintiff, Mr Russell then suggested that the
plaintiff was "estopped from relying on any failure to arbitrate before 2009
about the
rental increase as a basis for refusing to pay rent and royalties".        Again, the
submission is incorrect both at a
factual and a legal level. The plaintiff had been
prepared to pay and was tendering the contractually established rental and royalty
payments. He was not prepared to commit to an arbitration hearing until he received
what he considered to be relevant documents.
Nothing in that situation comes close
to an equitable situation by which the plaintiff should be estopped from saying that
the rental
and royalties being claimed in the Property Law Act Notice were not
correct in terms of the contract.

[23]   If defendant had a
view between 2006 and 2009 that the plaintiff was not
satisfactorily moving the arbitration forward ­ and there is not a lot in the
evidence
to suggest that the defendant itself was wishing to move the arbitration forward ­
then it was always open to the defendant
to take steps to ensure progress occurred
either directly through the arbitrator or under the Arbitration Act. Instead, for its
own
reasons it chose to issue a Property Law Act Notice purporting to claim as
contractually owing the amounts it wanted paid by way
of royalty and rental.


[24]   The plaintiff's solicitors sought to dissuade the defendant from proceeding on
its Property Law Act
Notice. For the defendant, its solicitors response was that "if
Mr Cameron genuinely challenges the lessor's right to [issue the
Property Law Act
Notice], he ought to apply to the Court for relief".


[25]   The plaintiff accordingly was forced to make this
application.


The discretion as to costs ­ the principles


[26]   All matters in relation to the costs of this proceeding are at
the discretion of
the Court: High Court Rule 14.1.


[27]   Rule 14.2(a) encapsulates the primary principle that "costs follow the
event"
unless particular considerations dictate otherwise.


[28]   Consistently with that approach, r 15.23 provides in relation
to a
discontinuance that a discontinuing plaintiff must pay the costs of the proceeding
"unless the defendant otherwise agrees or
the Court otherwise orders".            That
presumption may be displaced if the circumstances make a different costs outcome
just
and equitable:    Kroma Colour Prints v Tridonicatco N.Z. Limited  (2008)
18 PRNZ 973 at 975 (CA). The Court of Appeal confirmed in the Kroma Colour
Prints case that the general costs discretion in r 14.1 may also override
r 15.23. The
Court of Appeal further noted that while the Court will generally not speculate on the
merits of a case it never heard,
the Court's costs decision may be influenced in the
exceptional case where the merits are clear.

[29]   An alternative test is
for the Court to determine in a realistic way who was
the successful party:    Waihi Mines Limited v Auag Resources Limited  (1993)
13 PRNZ 372 at 373 (Tipping J).


[30]   Ultimately, the determination of costs is a matter for the discretion of the
Judge upon an assessment
of all relevant circumstances: Waihi Minutes Ltd Auag
Resources Limited.


Decision


[31]   The central feature of this case is
that the defendant chose to issue a Property
Law Act Notice claiming sums at levels for which it had no existing contractual
entitlement.
By doing so, and insisting that the plaintiff bring this proceeding for
relief if the plaintiff wished to resist cancellation of
the lease, the defendant itself
brought about the litigation.


[32]   The lease was not cancelled. Rather, it ran its term and the
proceeding
thereafter became meaningless.


[33]   On the other hand, had the proceeding continued this is a case where the clear
merits of the application were with the plaintiff. The intended discontinuance comes
about not because of a lack merit in the plaintiff's
case but because the immediate
object of the application ­ to protect the plaintiff's leasehold interest ­ was achieved.


[34] 
 The sense of disgruntlement over the plaintiff's means of dealing with the
dispute from 2007 to 2009 is by its nature one of those
matters which could only be
tested and adjudicated upon through full evidence. But there is sufficient in the
information before
the Court to suggest that both parties were taking commercial
positions through that period. That is simply background. When the
defendant came
in 2009 to look for a "remedy" it was for the defendant to proceed in a way that was
legally justified. There may
have been some logical merit in issuing a Property Law
Act Notice as a perceived means of bringing matters to a head without the
expense
of itself issuing litigation. There was, however, no legal merit for the reasons I have
explored.

[35]   This is accordingly
a case where the plaintiff is entitled under r 15.23 to an
order for costs, notwithstanding that it will then discontinue the proceeding.


Categorisation


[36]   Mr Russell submits that if there is to be a costs order this a category 1
proceeding. That would mean,
in terms of r 14.3, that the application was of a
straightforward nature and able to be conducted by someone considered junior
counsel.
I disagree. The case is appropriately a category 2 proceeding, having
average complexity.     The threatened cancellation of a commercial
lease was
involved.   I further note that when I fixed the costs of the appearance on
12 May 2009 on a 2B basis and ordered that
they be costs in the cause, neither
counsel objected to that categorisation.


[37]   In terms of reasonable time under r 14.5, I
consider that this was a case
involving a normal amount of time and accordingly it is appropriately band B. Ms
Dwight did not contend
for a band C determination.           When responding to Mr
Russell's submission that band A should be applied because the application
had been
relatively straightforward, Ms Dwight noted that an application of this nature has the
urgency of an injunction proceeding
and in this case was accompanied by a lengthy
affidavit with voluminous exhibits which had to be brought together in that context.
On that basis there may have been an argument for band C. As it is, I consider that
the reasonable time is in accordance with band
B.


[38]   Ms Dwight provided calculations of costs on a 2B basis, which total
$6,560.00. Within that total she has correctly identified
the relevant items. Mr
Russell took issue with one item ­ "appearance at call-over on 12 May 2009 (item
4.17) $320.00". Mr Russell
objected to that item on the basis that the defendant's
solicitors had sought to deal with that attendance by consent rather than
through
appearance in the Greymouth Court when the proceeding was first called. In my
Minute of 12 May 2009 I have already dealt
with the costs of that appearance on a
2B basis. The appearance was appropriate and reasonable. I do not intend to revisit
that costs
award.

Order


[39]    I order that the defendant pay to the plaintiff the costs of this proceeding on a
2B basis in the sum of $6,560.00, together with disbursements
of $400.00.




____________________

Solicitors
Cavell Leitch Pringle & Boyle, Christchurch for Plaintiff
Lane Neave, Christchurch
for Defendant