IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2015-409-000111
[2018] NZHC 2655	

BETWEEN	NICON LIMITED
Plaintiff	
AND	TOWER INSURANCE LIMITED
First Defendant

STREAM GROUP NZ PTY LIMITED
Second Defendant	

Hearing:	(Determined on the papers)	
Appearances:	P B McMenamin for Plaintiff
J P Forsey and S E Henderson for First and Second Defendants	
Judgment:	12 October 2018	

JUDGMENT OF GENDALL J
As to Costs

NICON LIMITED v TOWER INSURANCE LIMITED [2018] NZHC 2655 [12 October 2018]

[1]	On 8 August 2018, I released a judgment in this proceeding (the Judgment) answering four preliminary questions proposed by the parties. Costs were reserved and at [103] of the Judgment I directed the parties to endeavour to seek agreement on costs. Agreement was not reached and both parties have now filed memoranda on this costs issue. Each claims to be the successful party in the action and seeks costs from the other on a category 2B scale basis.

[2]	The central issue in determining costs in this matter is whether one party has obtained greater success and, if so, which, or whether there has been commensurate success, resulting in costs lying where they fall.

Where does success lie?

[3]	The fundamental principle is that an award of costs should follow the event and the unsuccessful party, as r 14.2(a) of the High Court Rules provides, should pay costs. However, here, the parties contest who was successful. A common sense approach is to be taken in identifying which party succeeded.1 It requires consideration of which party won the principal contests of law and fact, as well as a realistic appraisal of the end result.2 The Court should not focus on who initiated what step and the extent to which that step succeeded or failed.3 Moreover, the fact that a plaintiff did not achieve all of what it claimed does not negate a costs order.4

[4]	The plaintiff, Nicon Limited (Nicon) submits that the overall question in the proceeding is whether the first defendant, Tower Insurance Limited (Tower), and the second defendant, Stream Group NZ Pty Limited (Stream), were liable to it under either or both of two alleged agreements. Tower and Stream denied the existence of either agreement as a binding contract. However, under the first question, I determined that the first document titled “Heads of Agreement” (HOA) was a binding agreement on the parties.

[5]	The second question to be answered was to this effect:

1	Young v Tower Insurance [2017] NZHC 482 at [11] – [13].
2	Lawrence v Glynbrook 2001 Ltd [2015] NZHC 1005 at [8].
3	Lawrence v Glynbrook 2001 Ltd, above n 2.
4	Driessen v EQC [2016] NZHC 1048.

Was Tower/Stream obliged to offer Nicon (all the) demolition work in respect of properties for which Nicon had provided quotes/assessments?

[6]	While strictly speaking my answer to the second question was “No”, as I outlined at para [102](b) of the Judgment, this answer was qualified, as it was

…subject to the qualifications I note at paras [83] and [84] above.

[7]	Those paras [83] and [84] of the Judgment provided:

[83]	That qualification [on the answer “No” to question 2] relates to what was in reality an ancillary question posed at the hearing before me. This dealt with the broad issue under the HOA: in what way were the defendants obliged to involve Nicon in its decision-making for the allocation of demolition work after mid-2012?

[84]	This of course, as I have mentioned above, brings into play amongst other things the final clause of the HOA outlined at para [75] above. My general conclusions on this issue are outlined at paras [77] and [78] above. To recap, the description in the HOA of Nicon as a “preferred contractor” and the general provisions of the HOA itself do not allow Stream or Tower to sidestep offering to Nicon the chance at least to be engaged in any competitive tendering process that may occur. Although it is strongly disputed by Nicon, the defendants argue that Nicon voluntarily left the demolition market in September/October 2012 which ended the preferred relationship. That issue was not resolved in evidence before me and in any event is potentially a subsequent matter for consideration in this proceeding outside the preliminary issues I am required to determine here.

[8]	It is useful here to repeat paras [77] and [78] to which reference is made in para
[84]	as outlined above. These paragraphs, along with the explanation provided in [76] state:

[76]	This exclusion/ reservation clause [the final clause of the HOA] prescribes particular circumstances in which Stream is permitted to engage and allocate work to other contractors.

[77]	These exclusions support the interpretation I have taken above. The first makes it clear that Stream is allowed to engage other contractors if, when Nicon is offered the work, it has indicated that it does not have the capacity to undertake the work in a timely manner and thus to meet the necessary time frames. But initially, where Nicon is able to do the work in a timely way, Stream is not permitted to simply engage another contractor instead for no specific reason. This, of course, is also subject to the further reservation and exclusion I outline below.

[78]	This second reservation permits Stream to enter into a competitive tendering process for any contract at any stage to ensure a market rate for demolition contracts is maintained under the HOA. However, in my judgment, Nicon as the “preferred contractor” is clearly meant to be part of

this tendering process. Otherwise, those words, “preferred contractor” would mean nothing. I agree with Nicon’s submission that this clause does not allow Stream to sidestep offering to Nicon the chance at least to be engaged in any competitive tendering process that occurs. Whether indeed this may or may not have occurred here is another separate matter, however.

[9]	While my answer to question 2, in a strict sense, as I have outlined above, was “No”, my findings were to a broad extent in favour of Nicon’s position. This was generally in line with some of its submissions that the final clause of the HOA between the parties required Stream at least to offer Nicon the chance to be engaged in any competitive tendering process that was to occur designed to ensure market rates for those demolition contracts were maintained. The other reason for the negative answer to this second question was because I had also slightly altered the wording of question 2, as I noted at paras [5](b) and [64] of the Judgment, to make matters clearer.

[10]	The third question addressed the brief issue as to whether at operative times Stonewood Homes Limited acted as the agent of Tower and Stream. In line with Nicon’s contentions on this issue, I found that it did and the answer to this question was “Yes”.

[11]	The fourth question dealt with a subordinate agreement [the fee quote agreement] which it was claimed by Nicon existed between the parties. Nicon argued that under the fee quote agreement it was entitled to a fee of $350 (plus GST) for each property demolition quote commissioned by Tower/Stream after 21 July 2011 that was prepared by Nicon. In answering this question, I found that Nicon could not properly establish on the evidence that such a fee quote agreement existed. It followed, therefore, that Nicon’s claim in its Second Amended Statement of Claim at paras [44]
– [46] (for $379,050 for 1083 quotes it prepared) must necessarily fail.

[12]	Thus, while Tower succeeded on this fourth question, my findings on questions 1, 2 and 3 were generally in Nicon’s favour.

[13]	Mr McMenamin, counsel for Nicon, in his submissions went on to argue then that any costs awarded to Nicon here should not be reduced in terms of r 14.7(d) of the High Court Rules because of Tower’s success under this fourth question. He

endeavoured to argue that this claim represented only a minor part of the overall proceeding and did not significantly increase the costs incurred by Tower.

[14]	In response, in its submissions, Tower contended that it actually was the successful party on all issues because my findings in the Judgment did not resolve the overall dispute in Nicon’s favour. Nicon’s success, it was said, was limited to subsidiary issues. Tower argued that Nicon cannot have won here because I did not find there had been a breach of the HOA in my answers to questions 1 and 2.

[15]	On all of these matters, in my view, Tower’s submission overlooks the fact that this was only a preliminary questions hearing. I was not asked to determine liability under the HOA. Rather, I was to decide as a preliminary issue whether the HOA was binding and to interpret what were its terms. My findings were to provide a clear base from which further argument and then a decision about liability could be made.

[16]	I accept, however, that the only complete determination of an issue relating to a pleaded cause of action in this proceeding was with respect to the fourth question and Nicon’s fee quote agreement claim. Tower/Stream successfully defended this claim.

[17]	Although it might be said that Nicon overall was more successful here because, to a large extent, I agreed with many of its submissions on three of the four questions I was required to address, I consider that the success achieved by Tower/Stream on the fourth issue was meaningful. Nicon’s overall claims in this substantive proceeding relate to its alleged entitlement under the two contracts with Tower/Stream. In answering the preliminary questions, as I have noted above, I found that one of those agreements, the secondary fee quote agreement did not exist as a binding contract. Nicon is thus unable to recover the substantial damages sought from Tower/Stream related to that claim. I did, however, find that the other agreement, the HOA, was enforceable so Nicon is able to continue its proceeding regarding any liability Tower/Stream may have under that contract.

[18]	Considering, therefore, the end result of the lengthy April 2018 hearing before me, I am of the view that both parties have had a level of success which is broadly

similar. I note in Nicon’s submission that the fourth question used less of the Court’s time than a consideration of the other three questions. I express no view on that aspect, however. Even if there is substance in the claim, nevertheless, had that fee quote agreement been made out, Tower would have been required to meet a substantial damages award in favour of Nicon. Therefore, Tower’s success on that point was significant, in my view, in the wider context of this proceeding.

Conclusion

[19]	For all the reasons outlined above, I conclude that the parties here have had commensurate success, with Nicon, on the one hand, proving that the first agreement, the HOA, existed, achieving some assistance with my interpretation of its terms, but that, on the other hand, Tower succeeded in defending Nicon’s fee quote agreement claim and establishing that this alleged contract did not exist. Therefore, I order here that costs are to lie where they fall.

...................................................
Gendall J

Solicitors:
K J McMenanmin & Sons – Paul B McMenamin, Christchurch Duncan Cotterill, Christchurch