IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE	
CIV-2022-441-15
[2023] NZHC 1245	

BETWEEN	PATRICIA JEAN MARR and KEVIN DOUGLAS ROBERTS
Plaintiffs	
AND	ANGELA JANE KENNINGTON
Defendant	

Hearing:	3 May 2023	
Appearances:	S J Webster for Plaintiffs M A Black for Defendant	
Judgment:	25 May 2023	

JUDGMENT OF ASSOCIATE JUDGE SKELTON

[1]	This matter concerns a costs dispute arising out of a now redundant application for an order for possession of a property in Napier under s 251 of the Property Law Act 2007.

[2]	In early 2019, Wayne and Elizabeth Kennington sold a property they owned at 43 McGrath Street in Napier to one of their daughters, Patricia Marr, and her partner, Kevin Roberts, the plaintiffs.

[3]	Wayne and Elizabeth’s other daughter, Angela Kennington, the defendant, was living in the property at the time of the sale and continued to do so until February 2023.

[4]	Subsequently, the plaintiffs decided they wanted to sell the property and to be able to offer it with vacant possession. They served the defendant with a notice to quit which expired on 14 February 2022. The defendant refused to vacate the property,

MARR v KENNINGTON [2023] NZHC 1245 [25 May 2023]

asserting a proprietary interest in the property. The plaintiffs then applied for an order for possession.

[5]	The plaintiffs’ application for summary judgment was  declined  by  Associate Judge Johnston on 5 October 2022 on the basis that there were factual controversies such that the Court would benefit from a full hearing.1

[6]	The defendant sought costs in relation to the plaintiffs’ unsuccessful application for summary judgment and this application was dismissed with costs reserved in the cause.2 Associate Judge Johnston found:
[14]	I do not doubt that the plaintiffs regard themselves as having a case that justified an application for summary judgment. The mere fact that they were unsuccessful is not to the point. In order to take the case outside the general rule identified in Philpott, there would need to be a degree of inappropriateness or even an impropriety in the conduct of the case of the unsuccessful plaintiff. The correspondence that the defendant has put before the Court strikes me as nothing more or less than a well-developed argument on the part of the defendant as to why the plaintiffs will not succeed in their claim proceeding. I do not see that that can alter the position.

[15]	In the end I am not convinced that this case falls even close to those cases which have been treated as exceptions to the Philpott approach.  As  Mr Webster submits those cases are truly exceptional.

[7]	On 25 November 2022, the plaintiffs filed an amended statement of claim, adding a claim for alleged rental arrears. On 19 January 2023, the defendant filed an amended statement of defence.

[8]	The substantive application was set down for a three-day hearing commencing on 10 July 2023.

[9]	On 14 February 2023, the defendant vacated the property.

[10]	The application for an order for possession is no longer required. Other issues in relation to unpaid rent, and an issue concerning damage to the property, remain live and have been referred to the Disputes Tribunal.

1	Marr v Kennington [2022] NZHC 2561 at [28].
2	Marr v Kennington [2022] NZHC 3239 [Costs judgment].

[11]	The parties have been unable to resolve the issue of costs of the proceeding to date. The plaintiffs’ position is that costs should be awarded in their favour on an indemnity basis in respect of both the summary judgment application and the substantive proceeding. The defendant says that she is entitled to costs on the summary judgment application which she successfully defended, but that costs in the substantive proceeding should lie where they fall.

Relevant costs principles

[12]	The principles governing the Court’s discretion to award costs are well established. 3

[13]	Questions of costs are ultimately a matter of discretion, the overall objective being to achieve an outcome that best meets the interest of justice. However, the discretion is not unfettered; it is qualified by the applicable costs rules, rr 14.2–14.10 of the High Court Rules 2016, and must be consistent with established principles. In particular, the fundamental principle applying for the determination of costs is that costs follow the event and 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.4

[14]	The Court may order a party to pay increased costs where the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or a step in it. Essentially, increased costs may be awarded where there is a failure by the paying party to act reasonably.5

[15]	Indemnity costs may be ordered if, for example, the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or step in a proceeding; or some other reason exists which

3	High Court Rules 2016, r 14.1; Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [7] and [16]; Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 (CA) at [21]–[24] and [28]; Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt Ltd) (2002) 16 PRNZ 662 (CA) at [27]; and Kinney v Pardington [2021] NZCA 174 at [1].
4	High Court Rules, r 14.2 (1).
5	Rule 14.6(3)(b); and Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].

justifies the Court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.6 Essentially, indemnity costs may be awarded where a party has behaved either badly or very unreasonably.7

[16]	The Court may also take into account written offers that are expressly stated to be “without prejudice except as to costs”.8

Success in this proceeding

[17]	This case sits within a band of cases where although the proceeding has not yet been discontinued, the substantive application is no longer required, and the application will ultimately be discontinued.9 Mr Webster anticipates that the matter will be discontinued by consent after the issue of costs has been determined.

[18]	Because there has not been any determination of the merits of the plaintiffs’ substantive application, it is hard to determine success in the usual sense of the word. Ordinarily, it will not be necessary or appropriate for the Court to make a determination of success on the merits when a matter is discontinued or proceedings are otherwise rendered futile, unless the merits are clear.10

[19]	The plaintiffs submit that where a discontinuing plaintiff has clearly achieved its end by some other means or where it has otherwise discontinued for reasons not plainly unconnected to the merits, it will not have failed, and awarding costs in favour of the discontinuing plaintiff can be considered consistent with the principle that costs follow the event, because the plaintiff is properly seen as the successful party.11

6	High Court Rules, r 14.6(4)(a) and (f).
7	Bradbury v Westpac Banking Corp, above n 5, at [27]-[28]; and Prebble v Awatere Huata (No. 2)
[2005] NZSC 18, [2005] 2 NZLR 467 at [6].
8	High Court Rules, rr 14.10 and 14.11; Blakesfield v Foote [2016] NZHC 1354, [2016] NZAR 1112 at [20].
9	Therefore, as acknowledged in the defendant’s submissions, the presumption in r 15.23 requiring a discontinuing plaintiff to pay the defendant’s costs up to the point of discontinuance does not apply in this case. In any event, the presumption would be displaced for the reasons set out in this judgment.
10 Powell v Hally Labels Ltd [2014] NZCA 572 at [23]-[24]; and N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [99].
11 David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at 2.56; and Powell v Hally Labels Ltd, above n 10, at [21].

[20]	In this case, the plaintiffs say that the defendant’s action in vacating the property means that they have achieved what they sought in their statement of claim because the result is tantamount to the Court having made a possession order in their favour.

[21]	Mr Webster relies specifically on the decisions in Carmel College Auckland Ltd v North Shore City Council12 and Eagles View Queenstown Ltd v Queenstown Lakes District Council.13

[22]	In Carmel College Auckland Ltd, an application for judicial review, the defendant changed its policy after proceedings were initiated and the plaintiff thereafter discontinued. Venning J found:14
[19]  While counsel for the respondent is strictly correct that the merits of  the plaintiffs’ claim have not been determined the practical effect of the subsequent decisions made by the defendant to change its policy and to give the new policy retrospective effect is that the development contribution has been set aside. Given the change in policy the development will not and cannot be the subject of a development contribution. To that extent the practical situation is that the plaintiffs have achieved the result they sought in issuing the proceedings. So, while the merits of the plaintiffs’ challenge to the defendant’s policy have not been ruled on by the Court the plaintiffs have achieved what they set out to achieve in issuing the proceedings. The plaintiffs are prima facie entitled to costs as successful parties: r 47. The plaintiffs’ claim for costs on a 2B basis is unexceptional.

[23]	In Eagles View Queenstown Ltd, the applicants filed judicial review proceedings challenging a resource consent obtained by TSQ Ltd Partnership from Queenstown Lakes District Council, authorising the redevelopment of TSQ’s property in Queenstown. After the statement of claim was served, and before the statements of defence were due to be filed, TSQ advised that it was surrendering the consent challenged in the proceeding. The proceeding therefore became redundant and the applicants sought costs against the Council and TSQ. Associate Judge Lester awarded costs on a 2B basis against the Council and TSQ on the following basis:15

12	Carmel College Auckland Ltd v North Shore City Council HC Auckland CIV-2007-404-5894,  20 January 2009.
13	Eagles View Queenstown Ltd v Queenstown Lakes District Council [2020] NZHC 2282.
14	Carmel College Auckland Ltd v North Shore City Council, above n 12, at [19]. The plaintiffs also refer to Earthquake Commission v Whiting [2015] NZCA 144, (2015) 23 PRNZ 411.
15	Eagles View Queenstown Ltd v Queenstown Lakes District Council, above n 13, at [18]-[20].

[18]	Counsel for the Council describes the surrender of the consent as a “strategic step open to [TSQ] in the face of litigation”. That may well be true, but it is a strategic step that amounted to the respondents conceding the relief sought by the applicants.

[19]	That “strategic step” it seems was prompted by the Council advising TSQ that it did not intend to defend its decision in the proceeding. TSQ’s counsel advises that, while TSQ did not consider that the Council had made errors in the decision, “TSQ did not consider it prudent or practical in terms of ongoing costs and litigation risk to defend the Decision, effectively on the Council’s behalf.”

[20]	Counsel for the Council does not explain in their costs memorandum what led to the Council’s decision not to defend the decision. The Council’s position is simply that the surrender of the consent does not equate to success. I am unable to accept that in the context of this proceeding. In the absence of an explanation as to why the Council is not prepared to defend its own decision, I am entitled to draw the inference that the Council had determined the application was likely to succeed.

[24]	There was a different outcome in Maehl v Auckland Council,16 where an application for costs was made by the applicants in a judicial review proceeding, in circumstances where the resource consents under review had been surrendered. Justice Whata ordered costs to lie where they fall, on the following basis:17
First, the predictability afforded by the cost rules is premised on success in the proceedings, not a subjective evaluation of success or failure in terms of a party’s objectives. Second, unlike Carmel College Auckland Ltd, the Council in this case does not accept that it erred and has not changed its position. Third, there are many reasons why litigants yield in the face of litigation pressure and forgo their strict legal rights notwithstanding the merits. In my view this strongly militates against this Court being too ready to award costs when the merits have not been determined by the Court.

[25]	Another relevant case is Vector Ltd v Stuff Ltd.18 In that case, Vector sought an interlocutory injunction restraining Stuff from using confidential data that it had obtained and requiring that physical copies of the data be delivered to the Registrar of the High Court at Auckland. Stuff provided various undertakings which resolved the matter. The issue of costs was dealt with prior to the proceeding being discontinued, although it was anticipated that in short order the proceeding would be discontinued.

16	Maehl v Auckland Council [2017] NZHC 1902.
17	At [43].
18	Vector Ltd v Stuff Ltd [2018] NZHC 1680.

[26]	After reviewing the authorities, Moore J found that costs should lie where they fall on the basis that, even though Vector had achieved the result it sought, Stuff had not conceded it had erred nor resiled from its position and there was not sufficient evidence to safely conclude that Stuff’s decision to provide undertakings was a consequence of the proceeding being brought.19

Discussion

[27]	In the present case, the plaintiffs are seeking an order for possession and the defendant has vacated the property. However, as found in Maehl and Vector Ltd, it does not necessarily flow from that outcome that the plaintiffs are entitled to costs.

[28]	The defendant has not conceded that she would have been unsuccessful in defending the substantive application for an order for possession. Ms Black relies on the finding by Associate Judge Johnston that the defendant had an arguable case.20

[29]	Ms Black submits that the defendant only vacated the property due to the plaintiffs’ intentional neglect of urgent maintenance concerns and the subsequent effect on her health. The protracted proceedings have caused her significant stress and this was a factor in her decision to vacate the property. Ms Black says that it is also relevant that this is a case between family members.

[30]	Letters from the defendant’s solicitors to the plaintiffs’ solicitors with regard to maintenance are attached to the submissions for the defendant, but there is no affidavit evidence from the defendant with regard to the maintenance issues.21

[31]	In response to these matters, Mr Webster submits there were issues with the plaintiffs obtaining access to inspect the property while the defendant was in occupation, and he refers to the affidavits filed on behalf of the plaintiffs in support of the application for summary judgment.

19 At [22]-[23].
20 Marr v Kennington, above n 1, at [24].
21 As submitted by Ms Black, affidavits submitted in opposition to the application for summary judgment refer to the defendant suffering from significant health issues; for example, the affidavit of Wayne David Kennington dated 28 April 2022 at [19].

[32]	In my view, the issue is whether it is sufficiently clear that there is a link between the proceeding and the outcome to conclude that the plaintiffs have succeeded for costs purposes.22 In this regard, as found by Whata J in Maehl, “there are many reasons why litigants yield in the face of litigation pressure and forgo their strict legal rights notwithstanding the merits” and “this strongly militates against this Court being too ready to award costs when the merits have not been determined by the Court”.23

[33]	The defendant successfully defended the plaintiffs’ summary judgment application in October 2022. In response to the amended statement of claim filed in November 2022, she filed an amended statement of defence in January 2023. She then vacated the property in February 2023. The defendant maintains her position that she has an arguable defence to the substantive application. Some explanation for the defendant’s actions has been put forward in the submissions on her behalf. The issues raised in relation to maintenance are contested by the plaintiffs. However, I am not in a position based on the material before me to make any determinations or findings on the maintenance issues or any effect on the defendant’s health.

[34]	On balance, I find that it is insufficiently clear that there is a link between the proceeding and the outcome such that I can safely conclude that the plaintiffs have succeeded for costs purposes. In my view, it cannot properly be inferred on the material before me that the defendant vacated the property because she came to the view that the substantive application was likely to succeed.24

[35]	Costs of the summary judgment application were reserved in the cause. In the circumstances, including that there has been no determination of the substantive application, I do not consider that the defendant is entitled to be awarded costs on the summary judgment application.

[36]	I have concluded that the outcome which best meets the interests of justice is for costs to lie where they fall.

22 Bullock and Mullins, above n 11, at 2.56.
23 Maehl v Auckland Council, above n 16, at [43].
24 In Eagles View Queenstown Ltd v Queenstown Lakes District Council, above n 13, at [20], an inference was drawn against the Council in circumstances where no explanation had been provided in costs submissions as to the Council’s decision not to defend its decision.

Settlement offers

[37]	The plaintiffs refer to several letters which are characterised as “Calderbank letters”. Mr Webster submitted that none of them has any material effect on the Court’s discretion. All these letters are headed “without prejudice” and are therefore not admissible and cannot be taken into account.25

[38]	The defendant refers to a letter dated 18 April 2023 headed “without prejudice except as to costs”. However, that offer has no effect on the outcome because the defendant was seeking payment of her scale costs for the summary judgment application in full and final settlement of the costs issues in this proceeding.

Plaintiffs’ claim for increased or indemnity costs

[39]	For completeness, I refer to the plaintiffs’ claim for indemnity or increased costs.

[40]	The plaintiffs claim indemnity costs under r 14.6(4)(a) and (f), or alternatively increased costs under r 14.6(3). The basis for this claim is that the defendant mounted what Mr Webster called a “three-pronged (offensive/defence) attack” on the plaintiffs by lodging a caveat against the title, defending a meritorious application seeking a possession order and applying contemporaneously in the Family Court for a protection order against her sibling and her brother-in-law.

[41]	Even if I had found that the plaintiffs were entitled to costs of the proceeding to date, I do not consider this is a case that meets the threshold for indemnity costs or increased costs. As noted above, it is not appropriate to make any findings on the merits of the application for a possession order nor the application for a protection order in the Family Court. The lodging of a caveat against the title is also linked to the merits and not obviously unreasonable.

25	Blakesfield Ltd v Foote [2006] NZHC 1325, [2015] NZAR 1140 at [20]-[21].

Result

[42]	Costs should lie where they fall, including for the summary judgment application.

Associate Judge Skelton

Solicitors:
Lunn & Associates Ltd, Napier for Plaintiff Willis Legal, Napier for Defendant