Hall v Attorney-General [2013] NZHC 3388 (17 December 2013)

Last Updated: 26 February 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2006-404-003321 [2013] NZHC 3388

BETWEEN JOHN HALLIDAY HALL Plaintiff

AND THE ATTORNEY-GENERAL Defendant

Hearing: 21 October 2013 [On the Papers]

Counsel: A H J Commons for the Plaintiff

G Gardner for the Defendant

Judgment: 17 December 2013

JUDGMENT OF DUFFY J [Re Costs]

This judgment was delivered by Justice Duffy on 17 December 2013 at 4.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Counsel: A H J Commons, Auckland

_{Solicitors: Crown Law, Wellington}

HALL v ATTORNEY-GENERAL [2013] NZHC 3388 [17 December 2013]

[1] The plaintiff, John Hall, is the former owner of land (Hall West) that was acquired by the Crown under the Public Works Act 1981 (the Act) as part of the works to re-align the Albany to Puhoi section of the State Highway 1 route north.

[2] In a judgment delivered on 21 December 2012, I found that as at 22 April

2003, Hall West was surplus to the Crown’s requirements and the Crown was required to offer to sell Hall West back to Mr Hall in accordance with s 40 of the Act at the value of the land at that time.

[3] The Crown had argued that:

(a) Hall West was not surplus to its requirements;

(b) It was not obliged to offer Hall West back to Mr Hall; and

(c) Hall West had been exempted from the offer-back requirements by the Chief Executive of Land Information New Zealand (LINZ) pursuant to s 40(2).

I rejected those arguments.

[4] Mr Hall now seeks an award of costs in accordance with the general principle that costs follow the event. He also seeks an award that is above scale costs. At [18] of the substantive judgment (see Hall v Attorney-General [2012] NZHC 3615), I referred to how Mr Hall had given Eastwood Farms Limited (Eastwood) a power of attorney to conduct this litigation. Whilst Eastwood may be making the decisions, the litigation is that of Mr Hall. Accordingly, he is the person at whom the judgment is directed, so I shall refer to the plaintiff as Mr Hall throughout this judgment.

[5] The standard categorisation of costs in this Court is category 2B. Costs on this basis work out at $79,202. The Crown has not challenged this calculation, so I see no reason not to accept it. Mr Hall also seeks disbursements of $33,410. These are for filing fees, setting down fees and hearing fees. I am satisfied that the disbursements sought are reasonable and so I find he is entitled to $33,410 for disbursements. Costs at category 2B and disbursements come to a total of $112,612.

[6] I now turn to deal with Mr Hall’s request for an award of costs above the

standard scale. Mr Hall seeks an award of increased costs under rr 14.6(3)(a),

14.6.3(b) and 14.6(3)(c).

[7] The approach for determining increased costs is set out in Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA) (Holdfast). The approach involves four steps:

(a) Categorisation of the proceeding under r 14.3;

(b) Identifying a reasonable time for each step in the proceeding under r 14.5;

(c) As part of the step two exercise, a party can under r 14.6(3)(a) apply for extra time for a particular step; and

(d) The applicant for costs should step back and look at the costs award it could be entitled to. If it can argue for additional costs under r 14.6(3)(b), it should do so; but any increase above 50 per cent on the costs produced by steps one and two is unlikely, as the daily recovery rate is two-thirds of the daily rate considered reasonable for the proceedings.

[8] Mr Hall has carried out the categorisation exercise for a proceeding categorised as 2B. He has also calculated the costs award if the proceeding were to be approached as a category 2C proceeding. Under this category, the costs work out at $117,012; with disbursements added, the total sum comes to $150,422. However, Mr Hall argues that even this would not be sufficient to constitute a proper award of costs for this proceeding.

[9] Mr Hall’s actual legal costs came to $238,647.62. When the disbursements of $33,410 are added to this, the total sum comes to $272,057.62. Mr Hall acknowledges that daily recovery rates are intended to be approximately two-thirds of the rates New Zealand practitioners charge clients. Two-thirds of his legal costs

work out at $158,938.90, which with disbursements added comes to a total of

$192,348.90. Thus, even if the entire costs award were to be assessed at category 2C, the award would still be less than two-thirds of his actual costs, and so less than what the scale is intended to provide.

[10] The Crown opposes any award of costs to Mr Hall. It contends that his refusal of a settlement offer that it made to him renders him ineligible for an award of costs on any basis. It also refutes the specific arguments that he makes for increased costs.

Analysis

[11] I am satisfied that Mr Hall has established his claim for an increased award of costs. I have carefully considered the detailed submissions that the parties have made and I am satisfied that Mr Hall is entitled to increased costs under r 14.6(3)(a) and (b).

Rule 14.6(3)(a): complexity of the proceeding

[12] I accept Mr Hall’s submission that the nature of the proceeding was such that the time required was substantially in excess of the time allocated under band C, let alone band B. Here, he relies on comments made in the judgment on the complexity of the legal issues and the facts, which took place over a number of years.

[13] The Crown has sought to argue that there is a contradiction between Mr Hall’s reliance on his characterisation of the proceedings as complex and his other submission that the Crown’s stance was entirely incorrect at law, which the Crown contends is to suggest a case so simple that the Crown should not have defended it. In principle, an argument that is entirely incorrect should be simple to dispel. However, that was not the case here.

[14] Whilst the Crown’s arguments were wrong, they were not easy for Mr Hall to refute. When the Crown overlooks the character that constitutional law gives to it and purports to conduct itself like a private person, those affected by such conduct

are left having to untangle legally complex issues. In this case, the Crown was confused about its legal character and the effect this had on its dealings with Mr Hall.

[15] The finding that the Transit contract was ultra vires was the result of the Court rejecting the Crown’s submissions that Transit’s contracting with Mr Hall to acquire his land under the Act was lawful, and that the Transit contract could be relied on to bind Mr Hall when it came to the Crown’s argument that he had given up his statutory rights to have the land offered back to him once it became surplus to the Crown’s requirements. The Crown had failed to realise that Transit had no power to acquire land under the Act. The Crown had also failed to realise the pointlessness of the four year dispute between two government departments regarding whether one would buy the RAP 21 land (which originally formed part of Hall West) from the other when the land concerned was already in Crown ownership, and had been since

1997 when it was acquired from Mr Hall under the Act. Organisational structures devised by the Crown to implement a policy of ensuring that those charged with roading responsibilities and disposing of Crown land act on a sound commercial footing, had seemingly come to obscure the Crown’s view of its legal character. The legal impact of those failings is outlined in the judgment. Their occurrence serves to demonstrate the legal complexity of the issues involved in this proceeding. The contractual issues that the Crown raised in relation to Mr Hall’s contract with Transit vis-à-vis his contract with the Crown, and whether the former could survive the latter, were also legally complex, as they involved consideration of the concepts of merger and when implied terms can be read into contracts.

[16] The Crown has referred to comments by Associate Judge Doogue who, when dealing with an interlocutory application in this proceeding, described the proceeding as a “standard run of the mill case”. I do not consider that Associate Judge Doogue intended the impression that he gained of the proceeding at one interlocutory hearing to definitively describe the character of this proceeding. Further, I consider that as the trial Judge, I am better placed to determine the complexity of the proceeding. I am satisfied that the legal issues it raised were complex and difficult. The factual issues were complicated because the key issues covered a period from 1999 until 2009. It is always difficult trying to piece together

what has occurred in the past. It is especially difficult when, as was the case here, the Crown has restructured how it organises itself. In such circumstances, even simple tasks such as gaining access to the relevant information can be difficult. Mr Hall had to grapple with the legal fiction of more than one government department acting as a separate legal entity and to piece together factually which limb of the Crown and its officers had dealt with the subject matter of his claims, as well as ascertaining their actions and omissions at any given time. Those exercises would have been time-consuming and complicated.

[17] The Crown contends that neither party enjoyed “complete success”. Whilst that may be so, Mr Hall enjoyed substantial success. He established that he had a right under s 40 of the Act to acquire Hall West in accordance with the provisions of that Act, which the Crown had denied. He established that Hall West was surplus to the Crown’s requirements, which the Crown had denied. He established that the Chief Executive of LINZ had acted unlawfully when he exempted Hall West from the offer-back provisions of the Act, which the Crown had denied. Where he did not succeed was in establishing that Hall West became surplus to requirements as early as 1999. Instead, this Court found that the key date was 22 April 2003. However, this means that the Crown is obliged to offer back Hall West to Mr Hall at the 22

April 2003 value, which will be significantly less than its current value. Given the Crown’s reluctance to part with ownership of Hall West to Mr Hall, the outcome that he achieved amounted to a substantial victory.

[18] The Crown argues that it will be a rare case where a court will order a blanket band C categorisation as sought by Mr Hall. However, he has not done this for the purpose of a regular award of costs. He has referred to category C costs as part of the stepped exercise described in Holdfast NZ Ltd to support an award of increased costs, the idea being that even if category C were to be applied to all steps, the outcome would be insufficient.

Rule 14.6(3)(b): unnecessary contribution to time and expense of proceeding

[19] The Crown refers to the principle in Bradbury v Westpac Banking Corp

[2009] NZCA 234; [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA) that to justify an award of increased

costs, the paying party must have failed to act reasonably. The Crown contends that

there is no “clear cause” in this case justifying an increase in the award of costs.

[20] Mr Hall contends that an uplift under r 14.6(3)(b) is warranted because: (a) The Crown did not act reasonably in defending the proceedings; (b) It did not act as a model litigant in the proceedings; and

(c) Evidence given by one of its witness, Mr Graham, contributed to time and expense in the proceedings.

[21] The first argument made by Mr Hall draws on matters that have already been considered under r 14.6(3)(a). The Crown contends that it was justified in defending the proceeding and points to Mr Hall’s failure to establish that Hall West was surplus to the Crown’s requirements in 1999. The Crown contends that at all times it acted with a “reasonably held belief about the law and the facts”. For the reasons I have outlined in relation to the Crown’s arguments under r 14.6(3)(a), I reject this submission. I can accept that the Crown acted in good faith and honestly believed it was entitled to act as it did regarding its reliance on the Transit agreement as binding Mr Hall. I can also accept the Crown acted honestly and in good faith when it came to the purported sale of RAP 21 between the two government departments. But I do not accept that its “belief about the law and facts” regarding the issues in this case was one that could be reasonably held.

[22] Regarding the notion that the Crown should be a model litigant and the criticisms of Mr Graham’s conduct as a witness in the case, I see no reason to consider these arguments in the context of the costs award. The matters I have already determined establish Mr Hall’s entitlement to an award of increased costs.

Rule 14.6(3)(c): importance of proceedings

[23] The Crown contends that as Transit has been replaced by another statutory entity, the proceeding had no public or ongoing importance. It is not clear to me if

the new entity has express power to acquire land under the Act, or if the Crown has altered the way in which it deals with Public Works Act acquisitions so that the findings in this proceeding have no ongoing relevance. However, there are general principles expressed in the judgment that may serve as a reminder to the Crown of its legal character. Given the extent to which this was overlooked in this case, I consider that the outcome of the proceedings has some ongoing importance for the Crown. It also has public importance insofar as it may help the Crown to avoid subjecting other citizens to arguments about its character that are legally baseless. I find, therefore, that there is some weight to Mr Hall’s argument under r 14.6(3)(c). This serves to bolster the already persuasive and successful arguments that he has made under rr 14.6(3)(a) and (b).

Rule 14.7(f)(v): refusal or reduction in costs

[24] The Crown argues that the case warrants a refusal or reduction in costs on the basis that Mr Hall failed, without reasonable justification, to accept an offer of settlement: r 14.7(f)(v).

[25] Mr Hall submits that the offer was to sell the land purportedly at a valuation as at November 2004. However, the Court determined 22 April 2003 as the correct date. Moreover, the sale price was set by the Crown on a take it or leave it basis; it was not open for referral to the Land Valuation Tribunal. Mr Hall also submits that the offer contained terms that were unlawful and unworkable, such as the plaintiff having limited access to the land and the inclusion of encumbrances.

[26] To succeed under r 14.7(f)(v), the Crown must show that the offer it relies upon constituted a better price than that which followed from the judgment.

[27] Paragraphs 38 to 39 of the Crown’s memorandum on costs refer to settlement discussions the parties had in 2007. Paragraph 38 of the costs memorandum refers to evidence of a settlement offer, which was contained in the brief of evidence of Richie Schofield (paragraph 122). Paragraph 39.1 refers to a meeting between the parties on 15 October 2007 to discuss settlement. In fact, the relevant paragraphs of Mr Schofield’s brief of evidence, which were headed “2007 negotiations to remove

caveat, settle litigation, settle LV7 proceedings”, were not given in evidence. The Court’s file copy of his brief of evidence shows paragraphs 122 to 127 of his brief of evidence being struck out and initialled. Paragraph 39.4 of the Crown’s costs memorandum refers to an agreement being forwarded to Mr Hall’s solicitors for execution on 9 September 2008. The agreement is one of the attachments to the affidavit of Treena Louise Hart, dated 4 March 2010. That agreement is an agreement for sale and purchase, with the stated purchase price of the land being

$4,630,000 plus GST. The sale and purchase agreement is the eighth edition of the form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society. It contains special conditions, which include discontinuance of High Court proceedings, and conditions which would have allowed the Crown to have access to the property to continue constructing the northern motorway. Clause 19 contained a number of “no objection” covenants, which required Mr Hall to contract out of rights given to him under the Act and the Resource Management Act 1991.

[28] Thus, the Crown’s submission is based in part on:

(i) the statements made in its memorandum;

(ii) evidence that was excluded and therefore not given at the hearing;

(iii) the sale and purchase agreement attached to the affidavit of

Ms Hart; and

(iv) the three letters attached to the Crown’s costs memorandum. The agreement attached to Ms Hart’s affidavit is the only evidential information that

is properly before the Court. The rest is no different from evidence given from the bar.

[29] The impression I gained from the material provided by the Crown is that I

may not have all that I should have received. For example, the letters that the Crown

has attached to its memorandum are all from the Crown to Mr Hall’s solicitor. I have not been given or referred to any copies of any written responses from Mr Hall, or file notes of any oral responses that his solicitor may have made. This makes it hard to assess the reasonableness of either party’s conduct regarding settlement. However, it is the Crown that seeks to rely on r 14.7(f)(v) for resisting a costs award against it and, having presented its case in the way that it has done, I will deal with the argument as best I can.

[30] The Crown’s costs memorandum and the letters attached to it show that the settlement offer was raised in a letter from Crown Law, dated 16 October 2007, to Mr Hall’s then Barrister, Paul Dale. The offer is described as “subject to the approval of Transit Board and LINZ”. In the letter, the Crown offered to sell Hall West, minus the RAP 21 land, to Mr Hall for a purchase price of $4,630,000, plus GST.

[31] The settlement offer in the letter of 16 October 2007 contained other provisions as well. There were various machinery clauses regarding payment of a deposit and when Mr Hall might expect to have access to Hall West. The title to be transferred to Mr Hall was to be subject to any encumbrance or covenant which was required to meet Transit’s obligations under “the resource consent or designation”. Thus, under the settlement offer, Mr Hall would have received less than the bundle of rights that attach to an unencumbered freehold title.

[32] Under the Crown’s settlement offer, the sale of Hall West was to be in settlement of two proceedings, being the present proceeding and another proceeding, Hall v Chief Executive of Land Information New Zealand HC Auckland CIV 2005-

404-007222, 9 December 2009, which related to the sale price at which another block of land known as Hall East was to be offered back to Mr Hall. There was also a reference to proceedings before the Land Valuation Tribunal. The letter went on to say that once the terms of the settlement offer were approved by the Transit Board, it would be referred to LINZ, which required approval of the financial terms of the settlement. If the requisite approvals were forthcoming, the matter was to be approached as if it were a sale conducted under the Act, with Mr Hall presented as the offeror and the Crown as the offeree. Therefore, at this stage, the offer to settle

Hall West appears to have hinged on Mr Hall settling other disputed matters with the

Crown as well.

[33] In the next letter (18 August 2008), Crown counsel, Malcolm Parker, is critical of delays occasioned by Mr Hall in responding to the settlement offer. In this letter, Mr Parker records that “the Crown is under no obligation to negotiate a sale of the Hall West block to your clients, Mr Hall expressly waived his s 40 rights”. Mr Parker goes on to say that in the interests of settling the proceedings, the Crown was prepared to try to negotiate a sale to Mr Hall. However, the letter ends with the statement that if Mr Hall has not signed the “agreement” by the end of the month, the Crown will withdraw from negotiations.

[34] The last letter (dated 26 August 2008) states that the Crown will not revisit the purchase price, though the price itself is not disclosed. The letter asserts that the parties had agreed on a purchase price based on the value of the property at November 2004. The basis for asserting such an agreement is not before me. The letter also states that Mr Hall considered November 2004 was the latest date at which an offer could have been made, whereas the Crown considered that this was the earliest such date. The letter makes it clear that the Crown will not negotiate on the actual price: “The New Zealand Transport Agency (formerly Transit) will not revisit the purchase price”.

[35] The letter of 26 August 2008 was followed by Crown Law sending Mr Hall the September 2008 sale and purchase agreement with a sale price of $4,630,000. The inference to be drawn from all this is that the Crown thought that the November 2004 value of Hall West approximated the price at which it was offering to sell Hall West back to Mr Hall. However, there is no expert valuation evidence to support the Crown’s view that, as at November 2004, the value of Hall West was thought to be $4,630,000, nor is there evidence to show that Mr Hall agreed with this valuation. The Crown has provided nothing in the form of a valuation report or acceptance by Mr Hall to substantiate its contention.

[36] Mr Hall contends that the figure of $4,630,000 plus GST was presented to him on a take it or leave it basis, without any room being left for his disputing

whether this figure represented Hall West’s value as at November 2004. This included his relinquishing the ability to refer the question of the land’s value to the Land Valuation Tribunal. Certainly this appears to be the effect of the letter of

16 October 2007 and the September 2008 sale and purchase agreement.

[37] I can accept that at all relevant times the Crown may have believed Hall West was worth $4,630,000 as at November 2004, but, given the paucity of evidence, this is as far as I will go. I am not prepared to find that the land’s value as at November 2004 came to $4,630,000. The best way in which I can view the Crown’s offer of settlement is to see it as offering to sell Hall West back to Mr Hall at the price of $4,630,000 plus GST, together with other conditions. However, this does not help to advance the Crown’s argument under r 14.7(f)(v).

[38] The value of Hall West as at 22 April 2003 is yet to be ascertained. As at September 2013, those responsible for obtaining a valuation to establish an offer- back price for Hall West were advising Mr Hall that it would be “possibly a month or so” before an offer would be made to him. Consequently, I cannot compare the value of Hall West as at 22 April 2003 with the offer of $4,630,000. Unless the Crown can show that the offer it now relies upon constituted a better price than that which followed from the judgment, it has no basis for arguing that Mr Hall should be denied an award of costs for failing to accept the Crown’s offer of settlement.

[39] In its costs memorandum, the Crown argues that a value as at November

2004 is closer to the valuation date of 22 April 2003 determined by the Court than is the outcome sought by Mr Hall in the amended statement of claim, which was for Hall West to be offered back to him at its value in 1999. This explains the Crown’s attempt to tie the offer of $4,630,000 to a valuation date of 4 November 2004. I reject this approach. The key point is whether Mr Hall rejected an offer that was better than the outcome he obtained in the judgment. This has to be ascertained by comparing actual values and not by assessing the temporal proximity of the date of one unproven valuation with the date of an as yet unknown valuation. If property prices were continuously rising over the period from 1999, a valuation date of

22 April 2003 will produce a better purchase price for Mr Hall than the valuation date of November 2004. On the other hand, if there was a market downturn between

April 2003 and November 2004, a purchase price based on the later valuation date may be more favourable for him. Without knowing what the value of Hall West was at each respective date, ascertaining which date would have led to the better outcome for Mr Hall is not possible. Thus, the Crown has not provided the evidence that it needs to establish its argument under r 14.7(f)(v).

[40] Furthermore, the settlement offers to sell Hall West back to Mr Hall were not based on the Crown offering him an unencumbered freehold title, as it must now do. So to this extent alone, he has done better than he would have done if he had accepted the settlement offers.

[41] The judgment on the substantive issues was delivered on 21 December 2012. The costs memoranda were filed in October 2013, following the parties’ failure to agree on costs. I consider that the Crown has had more than enough time to take the steps it needed to take to provide a proper foundation for its argument under r 14.7(f)(v). As a substantially successful litigant, Mr Hall has a prima facie entitlement to receive an award of costs. I am not prepared to allow the Crown further opportunity at this late stage to bolster its argument under r 14.7(f)(v). Accordingly, as presented, I find that this argument fails.

[42] I have already found that Mr Hall is entitled to an award of increased costs, and the disposal of the Crown’s argument under r 14.7(f)(v) leaves me to determine the amount of the costs award. Two-thirds of Mr Hall’s actual costs come to

$158,938.90. The addition of disbursements brings this to $192,348.90. I am satisfied that the actual time that Mr Hall’s lawyers spent on this proceeding was required by its factual and legal complexity and the way in which the Crown conducted its defence. I am also satisfied that an appropriate uplift of scale costs should bring the costs award to something that approximates two-thirds of Mr Hall’s actual costs. Accordingly, I find he is entitled to an increased award of costs of

$158,938.90, along with disbursements of $33,410, which brings the total sum to

$192,348.90.

Result

[43] Mr Hall is awarded increased costs of $158,938.90 and disbursements of

$33,410.

Duffy J