IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2018-404-2555
[2019] NZHC 2094	

UNDER	the Judicial Review Procedure Act 2016	
IN THE MATTER	of an application for judicial review	
IN THE MATTER	of the Construction Contracts Act 2002	
BETWEEN	ACE STRUCTURAL LIMITED
Applicant	
AND	JOHN GREEN
First Respondent

FIRMA CONSTRUCTION LIMITED
Second Respondent	

Hearing:	On the papers	
Counsel:	B Martelli for the Applicant
K Badcock for the Second Respondent	
Judgment:	23 August 2019	

JUDGMENT OF GORDON J
[As to costs]

This judgment was delivered by me
on 23 August 2019 at 3.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:	Heaney & Partners
K A Badcock, Rotorua

ACE STRUCTURAL LTD v GREEN [2019] NZHC 2094 [23 August 2019]

Introduction

[1]	On 4 July 2019, I gave judgment in favour of the applicant, Ace Structural Ltd (Ace), against the respondents, John Green and Firma Construction Ltd (Firma).1

[2]	The first respondent, Mr Green, adjudicated a dispute between Ace and the second respondent, Firma, in the Building Disputes Tribunal (BDT). Mr Green found in favour of Ace, but did not to award costs to Ace. Mr Green also ordered that the parties were to meet his fees in equal proportions. Ace applied to judicially review the costs decision and the quantum of Mr Green’s fees. Firma opposed the application. Mr Green was not represented at the hearing (the usual procedure for an adjudicator). He advised he would abide the decision of the Court.

[3]	Ace sought an order quashing Mr Green’s findings as to costs and an order that this Court set costs for the BDT adjudication in favour of Ace. It also sought an order that Mr Green’s fees be limited to an amount considered appropriate by the Court or
$20,000.

[4]	I found in favour of Ace in relation to the costs decision (on the basis of no or inadequate reasons) and made orders quashing Mr Green’s findings on costs as sought by Ace. I declined to make an order setting costs for the BDT adjudication.  Instead, I remitted the matter back to Mr Green to re-determine costs with reasons to be given. I did not uphold Ace’s claim in relation to Mr Green’s fees, being a matter for appeal, not judicial review.

[5]	The parties have been unable to agree on costs in this Court. Ace seeks costs and disbursements as set out in Annexure A to this judgment.2

1	Ace Structural Ltd v Green [2019] NZHC 1558.
2	There have been changes to the appropriate daily recovery rate and time allocations under schs 2 and 3 to the High Court Rules 2016. These changes apply to steps taken on or after 1 August 2019. The most recent step for which Ace seeks costs is the preparation of its memorandum on costs. That memorandum is dated 15 July 2019. Therefore, the new costs schedules do not apply to the present case.

The law

[6]	Costs are at the discretion of the Court.3 The High Court Rules 2016 provide guidance as to how the discretion might be exercised.4

[7]	The general principle is that the party who fails with respect to a proceeding should pay costs to the successful party.5 When applying the scale costs regime, the Court must consider each formal step individually for the purposes of assessing the appropriate time band. A blanket approach is not appropriate.6

[8]	Ultimately, the overriding consideration when exercising the discretion to award costs is that any award ought to do justice between the parties.7

Submissions

[9]	Ace seeks scale costs in the amount of $24,530. The items are all claimed on a 2B basis with the exception of preparation of the written submissions and the bundle, which are both sought on a 2C basis. Ace also submits that a total of $2,124 in disbursements should be awarded.

[10]	In response, Firma says costs should either lie where they fall or be awarded to Ace on a 2B basis with a 75 per cent reduction. In support of those two options, Firma notes that Ace was only partially successful. Firma also opposes the inclusion of Ace’s claim for attempting to negotiate agreement on costs and preparing a memorandum on costs in the scale costs calculation.

[11]	Firma did not oppose the disbursements as claimed by Ace.

Issues

[12]	I must determine the following issues:

3	High Court Rules 2016, r 14.1(1).
4	Rules 14.2–14.7.
5	Rule 14.2(1)(a).
6	Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZCA 544 at [35].
7	Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5].

(a)	Should costs lie where they fall?

(b)	What are the scale costs?

(c)	Should the Court reduce any costs payable to Ace?

(d)	Should the Court defer costs in this court until Mr Green has determined the costs issue remitted back to him?

(e)	What disbursements should be allowed?

Should costs lie where they fall?

[13]	There is a presumption that the successful party is entitled to costs, unless there are exceptional reasons.8 In the words of the Supreme Court, “the loser, and only the loser, pays”.9 Costs follow the event. Contrary to that principle, Mr Badcock, for Firma, submits that costs should lie where they fall. He advances three reasons in support.

[14]	First, even if Firma had not opposed the judicial review, Ace would have been put to a formal proof hearing, incurring similar costs. In response, Mr Martelli, for Ace, says that the fact is that Firma opposed the judicial review application and thereby increased the costs for Ace. Therefore, Firma, the losing party, should pay costs.

[15]	Secondly, the Court did not find any fault on Firma’s part; the Court only found that the adjudicator had erred in not providing adequate reasons. Mr Badcock says this is similar to the case of Chappell v Swindells, where Powell J found against the adjudicator but not the respondent (here, Firma).10 In that case, costs were not awarded against the non-adjudicator respondent. Powell J reasoned that:

[38] As for costs against Annex [the equivalent of Firma], the applicants have not succeeded in this proceeding by showing a fault on the part of Annex. Their success is a function of proving errors on part of the adjudicator in the course of his determination. In those circumstances, I am persuaded that I

8	High Court Rules, r 14.2(1).
9	See Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].
10	Chappell v Swindells [2018] NZHC 2982.

should exercise my discretion to order that costs lie where they fall, despite the applicants’ success.

[16]	However, Mr Martelli replies that Chappell is distinguishable as Annex, the equivalent to Firma, did not oppose the application or take any part in the action at all. Annex entered into liquidation, so the matter proceeded by way of formal proof.11 Therefore, in Chappell, it was natural and fair that the Court did not award costs against Annex, a non-opposing party. But that is not so in the present case; Firma opposed the judicial review application.

[17]	Thirdly, Mr Badcock refers to the relief sought by Ace: that the Court quash the adjudicator’s findings and itself make orders as to payment of costs in the BDT. Mr Badcock submits that, in circumstances where this Court did not make its own decision on costs in the BDT, Mr Green may or may not decide to award any costs to Ace. Mr Badcock says that if Ace is awarded costs in this Court and Mr Green then upholds his original decision refusing to award Ace costs for the BDT adjudication, then Firma will have been put to significant costs for a substantively identical outcome. Mr Martelli responds that success in this Court is not determined by the costs outcome in BDT. Regardless of what Mr Green’s determination is, the fact is that Ace was successful in this Court and therefore should be awarded costs in this Court.

[18]	I accept the submissions made by Ace. Overall, Ace was the successful party. It was partially successful, “yet success on more limited terms is still success”.12 For this reason, Ace is entitled to costs. I do not consider that there are exceptional reasons justifying departure from the primary principle that costs follow the event.

Scale costs

[19]	Rule 14.2(1)(c) of the High Court Rules provides that:

… costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application …

11	At [14].
12	Weaver v Auckland Council [2017] NZCA 330 at [26].

[20]	The proceedings were earlier categorised as category 2, band B. The appropriate daily recovery, at the relevant time, was $2,230.13 Rule 14.5 then provides:

14.5	Determination of reasonable time

(1)	For the purposes of rule 14.2(c), a reasonable time for a step is—

(a)	the time specified for it in Schedule 3; or

(b)	a time determined by analogy with that schedule, if Schedule 3 does not apply; or

(c)	the time assessed as likely to be required for the particular step, if no analogy can usefully be made.

(2)	A determination of what is a reasonable time for a step under subclause (1) must be made by reference—

(a)	to band A, if a comparatively small amount of time is considered reasonable; or

(b)	to band B, if a normal amount of time is considered reasonable; or

(c)	to band C, if a comparatively large amount of time for the particular step is considered reasonable.

[21]	There are two issues I must decide as to scale costs. First, whether steps 40 (preparation of written submissions) and 41 (preparation of bundle) should be included in the scale costs calculation on a 2C basis as now sought. Secondly, whether Ace should be awarded costs for step 36 (trying to negotiate a costs agreement and preparation of the memorandum on costs).

Ace’s written submissions and bundle: 2B or 2C?

[22]	A step should be categorised as band C if a comparatively large amount of time is considered reasonable for that step and band B if a normal amount of time is considered reasonable.14 The relevant time band should be determined with regard to the complexity of the issue to be determined and the time involved in preparing and formulating the arguments reflected in the submissions.15

13	High Court Rules, r 14.3 and sch 2 (prior to amendments effective 1 August 2019).
14	Rule 14.5(2).
15	Minister of Education v James Hardie New Zealand [2018] NZHC 2960 at [16].

[23]	First, as to Ace’s written submissions, the complexity of proceedings was not such that 2C would be appropriate. The matter was a fairly straightforward judicial review of an adjudicator’s determination under the Construction Contracts Act 2002 (CCA). Whilst the underlying facts involved the specialised area of construction contracts, the proceeding itself was one of average complexity. I accept that there is a paucity of cases discussing the meaning of bad faith and “without substantial merit” in the context of the CCA, and counsel were thus required to rely on case law regarding an identical provision in the Weathertight Homes Resolution Services Act 2006. But it cannot be said that that made the matter so complex as to justify costs on a 2C basis. The case did not involve “complex facts and law”, as submitted by Mr Martelli.

[24]	Secondly, as to Ace’s bundles, again, I do not consider the matter to have been of such complexity to justify costs on a 2C basis. Ace says it produced an “extensive” bundle of five volumes. I accept Mr Badcock’s submission that counsel for Ace represented Ace in the BDT adjudication and therefore was aware of the background information and held all relevant documents.

[25]	For the above reasons, the appropriate classification for both preparation of the submissions and the bundles is band B.

Step 36: Memorandum on costs

[26]	Next, Ace seeks costs (2 days) for trying to negotiate a costs agreement and preparing a costs memorandum under step 36.16

[27]	I first address the claim for preparing the costs memorandum. Whilst there has been some divergence in the courts’ approach to awarding costs on applications for costs, it is well established that such costs may be awarded.17 For costs purposes, an application for costs is to be treated no differently from an ordinary interlocutory application. In Paper Reclaim Ltd v Aotearoa International Ltd, the Court of Appeal held that there is to be no order for costs made in respect of a costs application where neither side’s position as to costs is completely upheld.18

16	Step 32 allows costs for other steps in the proceeding not specifically mentioned in sch 3.
17	Body Corporate Administration v Mehta (No 4) [2013] NZHC 213 at [85].
18	Paper Reclaim Ltd v Aotearoa International Ltd, above n 6, at [62].

[28]	Up to this point, I have not completely upheld Ace’s submissions on costs. I have re-categorised steps 40 and 41 to 2B (rather than 2C as claimed by Ace). Also, for reasons set out in the next part of this judgment I have accepted Firma’s submission that a reduction in scale costs is warranted. Therefore, Ace is not entitled to costs for the preparation of its costs memorandum.

[29]	Even if I had been minded to accept, in principle, that an award of costs could be made for costs negotiations, the claim fails as a consequence of the failure of the claim for preparing the costs memorandum.

[30]	In conclusion, costs on steps 40 and 41 should be on a 2B basis and I refuse to award costs for attempting to negotiate a costs agreement and preparation of the costs memorandum. This results in total scale costs of $15,833 as set out in Annexure B.

Should there be a reduction in costs?

[31]	Firma seeks a reduction in Ace’s scale costs pursuant to r 14.7 of the High Court Rules, which provides in relevant part:

14.7	Refusal of, or reduction in, costs

… the court may refuse to make an order for costs or may reduce the costs otherwise payable under those rules if—

…

(d)	although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; or

…

(f)	the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

…

(ii)	taking or pursuing an unnecessary step or an argument that lacks merit; or

…

(g)	some other reason exists which justifies the court refusing costs or reducing costs despite the principle that the determination of costs should be predictable and expeditious.

[32]	Mr Badcock submits that a 75 per cent reduction in scale costs is warranted for the following reasons.

Arguments for reduction

[33]	Mr Badcock submits that a reduction is justified under r 14.7(d). He says that although Ace was successful overall, it failed on the following issues:

(a)	That there was an error of fact giving rise to a question of law in relation to Mr Green’s findings that there was no bad faith on the part of Firma and that Firma’s claim was not “without substantial merit” (thus giving rise to Mr Green’s decision that costs should lie where they fall in accordance with the CCA);

(b)	Related to (a) above, that this Court should set costs for the BDT adjudication in favour of Ace on an indemnity basis; and

(c)	That Mr Green’s fees were unreasonable.

[34]	First, as to the error of fact issue, I held that Ace failed to demonstrate a state of affairs in which the true and only reasonable conclusion contradicts Mr Green’s determination on both the bad faith and “without substantial merit” claims.19 The error of fact issue was one of two grounds on which Ace advanced its judicial review of Mr Green’s findings as to bad faith and “without substantial merit”. The other ground was failure to consider evidence (tied in with the failure to give adequate reasons).

[35]	In essence, Ace succeeded because of the absence of reasons for the finding of lack of bad faith and limited, but insufficient, reasons for the finding that Firma’s claim and defence did not lack substantial merit (against a background of strong findings on the merits in favour of Ace and against Firma). I consider the way the claim was advanced including the relief sought seeking an order that this Court determine the BDT costs (as compared to the outcome) did significantly increase Firma’s costs.

19	Ace Structural Ltd v Green, above n 1, at [45] and [56].

[36]	Secondly, as to the issue of Mr Green’s fees, I considered that this was more appropriately a matter of appeal, not judicial review.20 I observed that Mr Green had given reasons for his fees in his determination and Mr Green was statutorily entitled to reasonable fees.21 This issue did not significantly increase costs. It was secondary to the bad faith and “without substantial merit” claims. But, in my view, the argument did lack merit (r 14.7(f)(ii)). And Firma was put to additional costs in responding to this cause of action.

Calculating the reduction

[37]	Next, the question is: how much reduction is appropriate? It is difficult to be absolutely precise as to how much preparation and court time related to the issues on which Ace was unsuccessful.22

[38]	Mr Badcock seeks a 75 per cent reduction in the scale costs. For reasons that are unclear, Mr Badcock seeks to apply a separate reduction for step 41 (preparation of bundle). In my view, it is appropriate that any reduction in this case should be applied universally to the scale costs as a whole. There is no reason why, in this case, a separate reduction should be applied to step 41 or any other individual item.

[39]	In justifying the 75 per cent reduction, Mr Badcock cites Weaver v Auckland Council where the Court of Appeal allowed a 50 per cent reduction in scale costs where the overall successful party was successful on approximately half of its claims.23     Mr Badcock submits that Ace was successful “only on extremely limited terms”. He says, “that the Court did not make any of the requested orders and only remitted the determination to the adjudicator on narrow grounds”.

[40]	Ace was unsuccessful in obtaining an order from this Court, effectively seeking a reversal of the costs order. But the matter has been sent back to Mr Green for reconsideration.

20	At [59].
21	At [58].
22	See Semple v Wilson [2018] NZHC 1703 at [45].
23	Weaver v Auckland Council, above n 12.

[41]	In my view, the 75 per cent reduction sought by Mr Badcock is excessive. I consider a reduction of 20 per cent is appropriate in relation to the BDT costs issue.

[42]	The issue of Mr Green’s fees was one of three causes of action advanced over a one-day hearing. But it was, in effect, of a secondary nature; the primary causes of action being those in relation to Mr Green’s findings as to bad faith and “without substantial merit”. A reduction of 10 per cent is appropriate for the cause of action in relation to Mr Green’s fees. The total reduction is therefore 30 per cent. This results in costs of $11,083.10.

Should the Court defer costs?

[43]	Finally, Mr Badcock submits that this Court should defer costs in this Court until Mr Green has re-determined costs for the BDT adjudication. I disagree. Regardless of whether Mr Green upholds his original determination as to costs or awards costs in favour of Ace, that does not change the fact that Ace was successful in this Court. I see no reason why costs in this Court should be deferred. The result in the BDT does not change the result in this Court. Thus, I do not propose to defer a costs order.

Disbursements

[44]	Ace seeks a total of $2,124 in disbursements for court-related, photocopying and courier fees. Firma offered no opposition.

[45]	For expenses to be recoverable, they must fall within the r 14.12(1) definition of “disbursement” and satisfy the requirements under r 14.12(2)–(3).

[46]	First, the expenses for which disbursements are sought fall within the definition of “disbursements” under r 14.12(1)(b)(i) and (iii). I am also satisfied that courier fees fall within the r 14.12(1)(a) definition and are generally recoverable.24

24	See Mawhinney v Waitakere City Council HC Auckland CIV-1999-404-1850, 26 September 2007 at [12] as cited in Sutton v Canterbury Regional Council [2015] NZHC 1000 at [39].

[47]	Secondly, I am satisfied that the disbursements sought were specific to the proceeding, reasonably necessary and reasonable in amount. Whilst no receipts have been provided for the expenses, I am satisfied that the amount claimed is reasonable and not disproportionate in the circumstances of the proceeding.

[48]	Accordingly, I award disbursements for the amount of $2,124.

Result

[49]	Ace Structural Ltd is entitled to costs of $11,083.10 and disbursements of
$2,124. I make an order for costs and disbursements in the total sum of $13,207.10 as set out in Annexure B to this judgment.

Gordon J

Annexure A — Costs as claimed by Ace Structural Ltd

Scale costs

Step	Description	Category 2	Band B	Sum	
1	Preparing and filing statement of claim	$2,230	3	$6,690	
10	Preparation for first case management conference (incl. discussions about discovery)	$2,230	0.4	$892	
11	Filing memorandum for first or
subsequent	case	management conference or mentions hearing	$2,230	0.4	$892	
40	Preparation	of	written submissions	$2,230	3 (Band C)	$6,690	
41	Preparation of bundle	$2,230	1 (Band C)	$2,230	
42	Hearing25	$2,230	1	$2,230	
36	Negotiating costs agreement and memorandum for costs (other steps in proceeding not specifically mentioned)26	$2,230	2	$4,460	
29	Sealing judgment	$2,230	0.2	$446	
	$24,530	

Disbursements

Description	Sum	
Filing fees	$540	
Hearing fee	$640	
Photocopying (bundle)	$862	
Courier (to second respondent)	$61	
Courier (to court)	$21	
	$2,124	

Total (claimed): $26,654

25	The time allocated is “The time occupied by the hearing measured in quarter days”.
26	The time allocated is “As allowed by the court”.

Annexure B — Costs as awarded

Scale costs

Step	Description	Category 2	Band B	Sum	30 per cent reduction	
1	Preparing	and	filing
statement of claim	$2,230	3	$6,690		
10	Preparation for first case management conference (incl. discussions about
discovery)	$2,230	0.4	$892		
11	Filing memorandum for first or subsequent case management conference or mentions hearing	$2,230	0.4	$892		
40	Preparation of written submissions	$2,230	1.5	$3,345		
41	Preparation of bundle	$2,230	0.6	$1,338		
42	Hearing	$2,230	1	$2,230		
29	Sealing judgment	$2,230	0.2	$446		
	$15,833	$11,083.10	

Disbursements

Description	Sum	
Filing fees	$540	
Hearing fee	$640	
Photocopying (bundle)	$862	
Courier (to second respondent)	$61	
Courier (to court)	$21	
	$2,124	

Total (awarded): $13,207.10