IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-2607 [2013] NZHC 1880

BETWEEN	NO 317 LIMITED Plaintiff

AND	CANTERBURY REGIONAL COUNCIL Defendant

Hearing:	26 July 2013 (Determined on the papers)
Submissions (in writing) 28 June 2013 and 5 July 2013

Appearances:	T C Weston QC and P A Cowey for Plaintiff
M G Colson and K J Dobbs for Defendant

Judgment:	26 July 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to costs

Introduction

[1]       This judgment concerns costs on an interlocutory proceeding.   The parties seek remarkably different orders.

The plaintiff ’s claim

[2]       The plaintiff ’s claim, filed in November 2012, was in relation to two causes of action, namely repudiation of contract and misfeasance in public office.

[3]       On  11  February  2013,  the  defendant’s  solicitors  wrote  to  the  plaintiff’s solicitors in relation to the two causes of action and security for costs.  They stated (summarised):

(a)	The  plaintiff  had  sold  its  business  including  the  contracts  which founded the repudiation claim.  The plaintiff by its deed of assignment

NO 317 LIMITED v CANTERBURY REGIONAL COUNCIL [2013] NZHC 1880 [26 July 2013]

assigned “all the rights, privileges, liabilities, obligations and interest of [the plaintiff] under the contract”.  The plaintiff therefore no longer had any rights in a contractual claim.

(b)       The tort of misfeasance claim was grossly under-particularised.  As it involves an allegation of reprehensible conduct, counsel for the plaintiff was also subject to r 13.8 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

(c)       Given the plaintiff’s apparent impecuniosity, the defendant required security for costs ($120,000 being the defendant’s solicitors estimate of an award of costs to trial with an appropriate uplift, calculated to be
$131,397, excluding disbursements, then rounded down to $120,000). [4]	The plaintiff’s solicitors responded on 14 February 2013. They responded:
(a)       The criticism of the first (repudiation of contract) cause of action was rejected.

(b)       The requirement for particularisation of the (misfeasance) cause of action was considered to be “difficult to respond to” given the absence of specifically requested particulars.

(c)       They considered that no security should be given as the plaintiff’s impecuniosity was linked to the subject matter of the proceeding, but an interested party who was funding the litigation would be prepared to give a “reasonably limited” undertaking.

The interlocutory applications

[5]	The  defendant  filed  its  interlocutory  applications  the  following  day,  and sought orders:

(a)	That the plaintiff’s claim (that is both causes of action) be struck out.

(b)	In the alternative, that summary judgment be entered in favour of the defendant.

(c)	That security for costs ($120,000 or otherwise as the Court ordered)

be provided.

[6]       The defendant filed a notice and evidence in opposition.

[7]       The interlocutory application was allocated a hearing to take place on 7 June

2013 (limited to the strike-out and summary judgment applications), with the defendant’s submissions due on 29 May 2013.   Security for costs was to be the subject of further discussion between the parties, but with time available for hearing of that on 12 June 2013 if required.

[8]       The defendant filed an affidavit in reply on 16 April 2013.   The plaintiff subsequently filed a further affidavit on 5 June 2013.

[9]       In the meantime, the plaintiff, approximately two weeks before the hearing of the strike-out and summary judgment applications, filed an amended statement of claim. That amended claim:

(a)	Maintained the first (repudiation of contract) cause of action. (b)	Introduced a new (repudiation of contract) cause of action.
(c)	Removed the misfeasance cause of action.

(d)	Introduced a new cause of action based on the torts of intimidation and intentional cause of loss by unlawful means.

The withdrawal of the applications

[10]     The defendant then withdrew the strike-out and summary judgment part of its application.  The defendant explains that it did so because, although it remains of the view  that  the  contractual  causes  of  action  are  flawed  because  of  the  plaintiff’s

assignment of its rights under the contract, the new economic torts introduced are very fact dependent.  The plaintiff saw no point, in terms of efficiency or saving of costs, in continuing the strike-out/summary judgment applications in respect of one set of causes of action only.

Agreement on security for costs

[11]     The  parties  then  reached  agreement  on  security  for  costs.    The  plaintiff agreed  to  provide  initial  security  for  costs  of  $50,000,  with  the  defendant’s application for security then adjourned so that the defendant may later pursue a further tranche of security (the plaintiff not accepting that any further security will be appropriate).   The parties did not reach agreement on the cost of the security application.

The defendant’s application for costs

[12]     Counsel for the defendant describes what happened, through the amended statement of claim, in these terms (I summarise):

(a)       The misfeasance cause of action had not been used by the plaintiff as a “spoiling tactic”.1   Rather, the plaintiff had pleaded all material facts and believed that the misfeasance cause of action was justified.  On review, after receiving the defendant’s affidavit evidence, the plaintiff saw (not withstanding an overlap between economic duress and misfeasance) that a cause of action in economic duress was a “better
fit”.

Counsel notes that the striking out of the misfeasance cause of action

alone would  not  have  been  sufficient  to  dispose of the plaintiff ’s

original statement of claim as a whole.

1	A term borrowed from the judgment of Associate Judge Bell in Official Assignee v Menzies (No
4) HC Auckland CIV-2009-404-3391, 4 May 2011, at [57], adopted by counsel for the defendant to characterise the plaintiff ’s original pleading.

(b)       The defendant had chosen to pursue a strike-out application, rather than issuing a formal notice for further and better particulars.2

(c)       The  plaintiff  should  not  be  criticised  for  failing  to  agree  to  the provision of security for costs in the face of the pending strike-out application, security having been promptly agreed once the strike-out and summary judgment applications were discontinued.  Imposition of costs would be inappropriate when that part of the application has been adjourned.

[13]     The defendant seeks the following orders:

(a)       Indemnity  costs  on  the  misfeasance  aspect  of  the  application, apportioned as $11,628, with a filing fee of $725, or in the alternative increased costs of $3,426 (calculated as 41% of a 2B award ($4,179 x
0.41 = $1,713, increased by 100% = $3,426)).

(b)       Security for costs.  The defendant seeks an apportionment of costs on a 2B basis of $896 (calculated as $4,179 x 0.19 = $896).

The plaintiff ’s opposition to costs

[14]     Counsel place emphasis upon the defendant’s discontinuance of the strike-out and summary judgment applications, asserting that withdrawal of such applications is akin to discontinuance of a proceeding.  That said, the plaintiff submits that the more appropriate course in relation to those applications is that costs lie where they fall.

[15]	Counsel  submit  that  costs  should  similarly  lie  where  they  fall  on  the adjourned security for costs application.

Discussion

[16]     I begin with the security for costs application.

2	Counsel relying on the observation of Master Thomson in Whitman v Airways Corporation of
New Zealand Limited (1994) 8 PRNZ 155 at 158.

[17]     On my assessment, it is just that the plaintiff pay costs on that application to date.

[18]     Through  the  agreement  obtained,  the  defendant  has  been  successful  in obtaining security.  The defendant’s solicitors had appropriately requested agreement to security by letter before issuing the application.  While counsel for the plaintiff submit that there should be no criticism of the plaintiff for failing to agree security in the face of a pending strike-out application, it remains a fact that security was a live issue.   The plaintiff could have responded by reaching an at least provisional agreement.   Instead the plaintiff had its solicitors respond by giving reasons as to why no security should be given at all, or alternatively there might be some form of limited undertaking from an interested party.

[19]     In the circumstances, the defendant’s application for security was justified. The defendant should have reasonable costs of its application.

[20]     The fact that the application for security remains extant and adjourned, so as to enable the defendant to pursue a further tranche of security, does not render an award for costs to date inappropriate.  Any costs later incurred will be dealt with later.   Pursuant to r 14.8(2) the current order I now make will be capable of later variation if appropriate, but the making of an order fulfils the primary rule under r 14.8(1), that the costs of an opposed interlocutory application be fixed now in the absence of special reasons.

[21]     The defendant’s approach to apportionment of scale costs is a reasonable one, as is the figure of $896 arrived at.

[22]     I now turn to the strike-out and summary judgment applications.

[23]     The costs of those applications should be dealt with now, as they are both at an end.

[24]     In my judgment, the just order is that there be no award costs in relation to those applications.  Following the amendment of the plaintiff’s claim, the defendant

has understandably formed the view that there was no point, in terms of efficiency or cost saving, in continuing the applications in relation to the contractual causes of action when the economic torts now pleaded are so fact dependent, and therefore not amenable to strike-out.   Given that decision, the fact that the bringing of the application has led to a withdrawal of the misfeasance cause of action (in favour of newly  pleaded  tortious  claims)  is  of  much  less  significance.    There  have  been repeated judicial observations as to the desirability of a preference for strike-out applications where there is a likelihood of final disposition of the proceeding.

[25]     I accept, as submitted by counsel for the defendant, that there is a distinction to be drawn between the new causes of action in tort and the cause of action (in misfeasance) no longer pursued.  The defendant’s communicated concerns as to the cause of action in misfeasance from the outset substantially related to a lack of pleading of material elements of the tort, and a belief on the part of the defendant that the plaintiff would be unable to sustain any such allegation.   This is not a proceeding in which a plaintiff has essentially tidied up its pleadings in relation to existing causes of action.   The Court is entitled to infer that the plaintiff, by abandoning at least for the time being the misfeasance cause of action, recognises that there is a fundamental difficulty with that pleading.  If the plaintiff had chosen to seek to properly particularise the misfeasance cause of action, it may well be that the defendant’s strike-out application would have proceeded to hearing with reasonable prospects of success.

[26]     In the event, a just costs resolution is that costs lie where they fall in relation to that application.

Orders

[27]     I order:

(a)       The plaintiff is to pay to the defendant in any event the costs of the defendant’s application for security for costs, to the extent that it has been  resolved  to  date,  and  I fix  those  costs  in  the sum  of $896, together with a disbursement of $725.

(b)	There is no order as to the costs of the applications for strike-out and

summary judgment.

Associate Judge Osborne

Solicitors:
Parry Field, Christchurch
Bell Gully, Wellington
T C Weston QC, Christchurch