Hamilton Accommodation Limited v Yi Ming Investment Limited [2024] NZHC 2178 (6 August 2024)

Last Updated: 13 August 2024

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2023-419-000072 [2024] NZHC 2178

UNDER	Part 19 of the High Court Rules and s 253 of the Property Law Act 2007
IN THE MATTER	of an application for relief against cancellation
BETWEEN	HAMILTON ACCOMMODATION LIMITED Applicant
AND	YI MING INVESTMENT LIMITED Respondent

Hearing:	On the papers
Appearances:	D Delic for the Applicant S Rawcliffe for the Respondent
Judgment:	6 August 2024

JUDGMENT OF GORDON J

[As to costs]

This judgment was delivered by me on 6 August 2024 at 10 am, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:

SD Legal Ltd, Hamilton Harkness Henry, Hamilton

HAMILTON ACCOMMODATION LTD v YI MING INVESTMENT LTD [2024] NZHC 2178 [6 August 2024]

• [1] This is an application for costs by the respondent Yi Ming Investment Ltd (YMIL).

• [2] On 19 June 2024, I gave judgment in YMIL’s favour, refusing an application by Hamilton Accommodation Ltd (HAL) for relief against cancellation of the lease pursuant to s 253 of the Property Law Act 2007 (the judgment).¹

Background

• [3] The background can be stated briefly. YMIL owns a property which has been subject to a deed of lease agreement since 2003. On 14 September 2020, the lease was assigned to HAL. Problems arose between the parties. YMIL alleged that HAL breached various provisions in the lease and issued a notice of intention to cancel the lease.

• [4] On 22 March 2023, HAL commenced the proceedings which lead to the judgment. I found that HAL had breached the terms of the lease with YMIL by: carrying out alterations to the premises without YMIL’s consent; refusing to attend an arbitration when notified of a dispute; and failing to pay YMIL’s solicitors’ reasonable costs of $15,417.52 for the enforcement of YMIL’s rights and remedies under the lease (costs incurred up to the date the proceedings were filed).²

Costs claimed

• [5] YMIL seeks indemnity costs against HAL. This claim is not founded on HAL’s conduct in the proceedings but instead on r 14.6(4)(e) of the High Court Rules 2016³ and cl 3.15(a) of the deed of lease entered into by the parties. That clause provides:

Legal Costs

3.15(a) The Lessee shall pay the Lessor’s solicitors reasonable cost of and incidental to the preparation of the documentation relating to this lease, any extension, variation, surrender or renewal of this lease and any rent review and the Lessor’s legal costs (as between solicitors and

¹ Hamilton Accommodation Ltd v Yi Ming Investment Ltd [2024] NZHC 1619.

² At [122].

3. Rule 14.6.4(e) provides that the court may order a party to pay indemnity costs if the party claiming costs is entitled to indemnity costs under a contract or deed.

client) of and incidental to the enforcement or attempted enforcement of the Lessor’s rights and remedies under this Lease.

• [6] On this basis, YMIL seeks indemnity costs of $22,555.70 inclusive of GST (which includes a filing fee disbursement of $110) and a further $1,000 plus GST for costs of filing the costs memorandum, a total claim of $23,555.70.

Submissions

• [7] In the judgment I directed that each party file and serve a memorandum in the event agreement could not be reached on costs.⁴

• [8] Ms Rawcliffe, counsel for YMIL, submits the Court may order HAL to pay indemnity costs because YMIL is entitled to such costs under a contract or deed, pursuant to r 14.6(4)(e).

• [9] Mr Delic, counsel for HAL, filed a memorandum stating that he has not received any instructions from HAL in respect of costs and was therefore unable to make submissions on costs.

• [10] Ms Rawcliffe submits that the costs are reasonable for the work that was required for the proceeding. This work included preparing and responding to evidence of over 360 pages of exhibits and filing further submissions in response to late submissions from HAL.

• [11] She further submits that on 31 March 2023, after the proceedings were commenced but before YMIL had taken any steps to defend the application, YMIL made a settlement offer without prejudice save as to costs. The terms of the offer required HAL to pay costs of $15,000 and undertake to meet its lease obligations in exchange for YMIL withdrawing the notice of cancellation. Ms Rawcliffe submits that the terms of this offer would have been more beneficial to HAL and that HAL’s rejection of this offer is another reason to support YMIL’s claim for indemnity costs.

⁴ Hamilton Accommodation Ltd, above n 1, at [127].

Indemnity costs

• [12] The principle that a party can enter into a binding agreement to pay another party’s full solicitor-client costs is clearly established.⁵ But those costs must nevertheless be reasonably incurred. Assessing whether indemnity costs claimed under a contract are reasonably incurred requires the Court to assess whether the tasks undertaken were reasonably necessary and are within the scope of the terms of the indemnity. The rates charged must also be reasonable. Finally, the indemnity arises out of a contract and so general contract law principles, particularly in the construction of the clause, are relevant to considering the claim.⁶

• [13] The Court of Appeal in Kent Sing Trading Company v JNJ Holdings Ltd, has also said that the Court’s discretion in awarding indemnity costs is more limited because the obligation arises in contract.⁷

• [14] I will undertake this assessment by first construing the term of the deed set out above. The tenant in this case is HAL. The landlord is YMIL. YMIL has incurred legal costs. Those legal costs have arisen because HAL applied for relief against cancellation of the lease. YMIL sought to maintain its right to cancel. The costs YMIL has incurred are “of and incidental” to the enforcement of its rights under the lease. HAL is therefore liable, pursuant to cl 3.15(a), for YMIL’s legal costs on a solicitor-client basis.⁸

• [15] I have reviewed the amounts claimed in the spreadsheet of attendances submitted by Ms Rawcliffe. The hourly rate for a partner or consultant was between

$425 and $495; the hourly rate for the senior associate was $420; for the solicitor $240; and for the law clerk between $150 and $180. I do not consider these rates to be unreasonable.

⁵ ANZ Banking Group (NZ) Ltd v Gibson [1986] 1 NZLR 556 (CA).

⁶ Watson & Son Ltd v Active Manuka Honey Association [2009] NZCA 595 at [20].

⁷ Kent Sing Trading Company v JNJ Holdings Ltd [2019] NZCA 388 at [132].

8. Compare Audio Essentials Ltd v Tripathi [2019] NZHC 311 at [7], which deals with indemnity costs under a lease. The relevant clause is not quoted in the judgment but the terms appear very similar to cl 3.15(a) in this case. See also Kent Sing Trading Company v JNJ Holdings Ltd, above n 7, at [131].

• [16] I have also carefully reviewed the activities included in the spreadsheet. I am satisfied the attendances are both reasonably incurred and come within the scope of the indemnity given in cl 3.15(a).

Effect of settlement offer without prejudice save as to costs

• [17] Rule 14.10 of the High Court Rules permits parties to make written offers without prejudice except as to costs that relate to an issue in the proceeding. The effect (if any) of making such an offer on the question of costs is at the discretion of the courts.⁹

• [18] The High Court Rules also provides the following guidance:

(a) if the terms of the offer would have been more beneficial to the party that rejected the offer, the party that made the offer is entitled to costs on the steps taken in the proceeding after the offer is made;¹⁰

(b) failure to accept the offer without reasonable justification may be grounds for the Court to award increased costs;¹¹ and

(c) the Court’s power to award indemnity costs is not limited by an offer made under r 14.10.¹²

• [19] I agree with Ms Rawcliffe that HAL’s failure to accept this offer would be an additional reason (if it were necessary to rely on it) to award costs as sought.

Result

• [20] I award costs in the sum of $23,555.70 to YMIL against HAL.

Gordon J

⁹ Rule 14.11(4).

¹⁰ Rule 14.11(3).

¹¹ Rule 14.6(3)(b)(v).

¹² Rule 14.11(2)(b).